College, it’s the land of financially unsound parties and impulse buying – right?
Wrong. College is not always a time for recklessly spending. People can just as easily set up bank accounts with a variety of saving methods.
If this sounds like a good idea to you (and it should), the first thing you need to do is decide what kind of account you want.
Let’s start with the basics of a savings account. Depending on which bank you belong to and your set up, you can deposit and withdraw money at your own leisure and it gains ever-so-slight interest. However, the interest rates may take a while to add up.
“The reason savings accounts have such low interest rates is because they’re so low risk,” Matthew Myers, sophomore in business and finance, said. “The general rule is the greater risk, the (greater) possible return.”
Because of this slow accumulation, savings accounts can be helpful for people with short-term savings goals or for emergency situations. The money is liquid, or readily available, making it different than things like precious metals or stocks that you would have to sell in order to obtain the money. Savings accounts are insured by the Federal Deposit Insurance Corporation for a maximum of $250,000 per person per bank, according to an FDIC online brochure.
Then, there are checking accounts, which work in similar way. You put money into your account and make withdrawals by using checks or a debit card, according to the Wells Fargo bank website. These cards are widely accepted, so they can be very convenient. The downside to a checking account is that it does not gain interest. Although, like a savings account, all checking accounts are insured by the FDIC for up to $250,000.
“My mom set me up a savings account when I was little kid,” Karter Krokstrom, freshman in engineering, said. “They had this program where they would pay you a dollar every time you grew an inch.”
The process of opening a savings or checking account is fairly simple. First, you need to fill out either a material or online application at your bank of choice. According to the Wells Fargo Bank website, you need to have a driver license or another form of I.D., your social security number, and possibly your physical or email address in order to submit an application. According to “How to Open a Bank Account and What You’ll Need” by Nerd Wallet blogger John Gower, you also must be at least 18-years-old to open a bank account in your name.
After completing the application process, you’ll usually be given the option to make an opening deposit. Some banks require a certain minimum and some do not.
Certain banks also offer online banking, a convenient way to manage your money. If you choose this, you’ll need to create an online username and password. Make sure you are the only one who has access to this information; try not to write it down, as this information can lead to regrettable consequences if it falls into the wrong hands.
Once you’ve gotten everything set up, it’s important to always know the balance of your accounts so you don’t spend more than you have. Several banks have overdraft fees that can cost you dearly and leave you more broke than you are now. Kendell Lolley, junior in horticulture, recalled a time her account was overdrawn and she paid the price.
“I thought my (paycheck) came through and I overdrafted over $200 … (my employer) didn’t put my check in on time,” Lolley said.
Most banks, in addition to online banking, have mobile phone apps that allow for continuous access to their bank accounts so people can track personal spending and manage their accounts.
Once you master the ins and outs of setting up a bank account, you can march fearlessly into the world of personal finance prepared.