Think About Your College Savings Accounts
By taking these tips to heart, saving for college becomes much easier to focus on.
By Al Dickenson — January 23, 2024
Going to college or university can become very expensive very quickly. In preparation, you may want to consider methods to reduce those expenses, including doing your research early on about what kind of bank account you should use while attending school. In part, this may fall under your parent's or guardian's purview, but no matter who is managing the money, saving it can never hurt. According to a recent Consumer Financial Protection Bureau study, nearly 670,000 pay roughly $15.5 million every year in various banking costs, like fees, and penalties. This averages out to more than $25 per person. While that may not seem like a lot of money at first glance in the grand scheme of things, it can add up very quickly. Thankfully, there are some potential ways to avoid these pitfalls.
Do These Features Matter?
No matter where you go, checking accounts work fairly similarly — they are near universal for banks and general knowledge. Most people will have a general idea of how they work, even if they do not use them personally. However, the features included with said checking accounts may not be so universal.
Some banks may not have branches, especially if they are small. Additionally, even if they have branches, it may be valuable to consider the location of all of those branches. If they are a Northeast-based bank and you are going to school in the Midwest or the South, it may be wise to transfer those funds to a national or different regional bank, for instance. While many banks can handle remote problem solving, there is nothing like being able to walk into a branch and solve your problems, cash checks, or deposit funds.
Regarding ease of use, research if your bank of choice allows joint custody of accounts. While you should be the primary manager of your financial wellbeing, a parent or guardian, presumably with more experience in the adulting world, could offer lasting and sage advice. Likewise, especially if the banks are not local to your school or residence, having online or mobile banking options may be useful. Consider if the bank's highly-rated app is an asset to you and your educational journey. Also, will you need or use ATMs? If so, what fees will be associated with using an ATM that is not organized by your bank of choice? Also, if you are working while in school, either on— or off-campus, look into whether or not your bank offers or allows direct deposit. Most employers, whether large or small, will likely prefer direct deposit. Also, especially if you are just a part-time resident on the campus, you may not want checks going to an address you cannot readily access. To monitor spending habits, ask if the bank provides account holders with monthly statements or analyses so you can see where your money is going.
What Are the Fees?
Also, consider banking fees. While the nation's largest banks usually provide all of the above potential advantages, they also tend to have the highest fees — perhaps due to their increased offerings. By contrasting national banks with local or regional ones, you may find that they have fewer fees, perhaps alongside fewer offerings. Again, this is where determining what features you want versus what features you need comes into play. Likewise, if other banks are not an option, consider credit unions. They are essentially the nonprofit versions of banks. Perhaps this is where online banks come in, but they may be difficult to use as well, depending on services, hours of operations, and other things. Most banks will let you avoid fees if you maintain a certain amount of money in the account. Also, overdrafting your account will almost certainly cause additional fees. These may be useful things to think through as you decide where to place your money.
Consider Security
While saving money is very important to future financial success, securing your money is equally important. There is an organization in the United States, the Federal Deposit Insurance Corporation (FDIC), which was created in the wake of the Great Depression of the 1930s by President Franklin D. Roosevelt, and it insures your deposited money, up to a quarter of a million dollars. In other words, should there be a financial collapse, you will be able to withdraw $250,000 in cash from your bank. Additional funds exceeding that threshold are not covered. All of the major banks are FDIC insured, and credit unions have similar legislation and organizations impacting them, specifically the National Credit Union Administration (NCUA). It is highly recommended you do not conduct any business with a non-FDIC/NCUA insured money lender or financial manager. The results could be disastrous. If there were to be an economic collapse, the last thing you need is to have your life savings flushed down the drain, whether or not they were intended for college or other uses.
While all banks you use should be FDIC insured, note that various other money-moving services, like Venmo, Cash App, Current, and Chime are not insured, monitored, or legislated in the same way. If one of those companies goes bust, it will be much more difficult to get your money back than if you simply kept it in a bank account. These new technological feats may be impressive, and perhaps even very convenient, but they also pose hidden dangers.
In that same vein, look into the stability of your bank. Bank closures are rare, but they do happen. So far in 2023 alone, there have been three major closures in the banking world. In many ways, buy-outs are even more common, with larger organizations buying up smaller ones, either those they are directly competing with or those in areas of potential future expansion. Similarly, you want to put your money into a bank that is secured from outside threats, like scammers, data thieves, and hackers. Asking questions about how your private information is secured may be a good idea. Banks must comply with a variety of best practices and laws regarding these topics, but they can also vary by state, so it is recommended to research what laws and organizations are associated with these considerations. If you receive monthly statements, as previously mentioned, be sure to critically analyze them. This can be one of the best ways to spot overcharges, fraudulent behavior, or other inconsistencies while on- or off-campus.
Finally, aside from insurance through the FDIC or NCUA, look at whether or not your bank of choice has multifactor identification infrastructure, either in their mobile apps or online banking services. They may even require multiple methods of identification to service you in person. This is a great way to prevent fraud and mismanagement with your financial stability.
What About Savings?
After locating a checking account for schooling funds, look into savings accounts to hold the money that you will not be spending within the next month. If the bank you use offers secured credit cards or credit builder loans, perhaps you should utilize that offer. They can be great first steps to developing a good credit history, which is valuable for anyone looking to strike out during or after college. These secured cards often ask for a deposit of cash beforehand, equaling the borrowing amount, whereas builder loans are focused on conducting payments prior to getting the total amount of the loan.
By taking these tips to heart, saving for college (or saving in general) becomes much easier to focus on. In many ways, when attending school, the last thing you need to or should be worried about is saving money and your financial management. With this advice, know that your money is safe and that you are free to focus more fully on your schooling, developing those efforts into future gains. That is the best kind of return on investment.
Al Dickenson
Al Dickenson graduated from Wisconsin Lutheran College with bachelor’s degrees in history, communication, and English. He currently serves as an editor for an international equine practitioners’ magazine in and around Milwaukee, Wisconsin, his hometown, where he lives with his wife.
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