A checking account will definitely be important when you need to start paying for bills, which I hope for your sake is later rather than sooner because paying bills sucks. What should you look for in opening your first account and what is the difference between checking and savings accounts?
Checking Account Guide
A checking account is exactly what it sounds like: an account that you have access to with checks-and also a debit card. A debit card acts like a credit card when you're purchasing items but doubles as a check because any money you swipe for is taken directly from your account. You can also use it at the ATM to withdraw money. They are very handy pieces of plastic.
Opening a checking account can be daunting because there are so many different banks and accounts out there. The best piece of advice is to get an account at your parents' bank if it's available. Often, if you have an account with the same bank as your parents, your checking account fee and/or monthly minimum balance will be waived. But that's just one thing to consider when you open a checking account.
Things to Look Out for When Opening Checking Accounts
- FREE Checking: You shouldn't be paying for a basic checking account. If you want more than just a basic checking account, check out other accounts that require you to have a balance or pay a monthly fee. Banks will often waive those fees if you sign up for automatic check depositing.
- Overdraft Protection: It's basically a line of credit in case you overdraw on your account.
- Good Internet Checking: An easy-to-navigate site is ideal to keep track of your spending.
- Low ATM Fees: ATM charges can really add up. Search for a bank that doesn't charge you to use other banks' ATMs or at least one that has a branch close by.
Most major banks will waive certain fees and minimums for students or have student-specific accounts, but make sure you know what your bank will charge you come graduation time. You don't want to be slapped with unplanned fees!
The most important thing with a checking account is to keep track of your money to make sure you don't go over and have bounced checks.
Savings Account Guide
A savings account can be really useful for putting money aside and making sure you don't touch it. Unlike most checking accounts, savings accounts do have monthly minimum balances or you will be charged a fee. With some student accounts, these minimums are low, like $100, but some can be as high as $500. Create a budget to see how much you can afford to put in and keep there.
It's a good idea to get a savings account at the same bank you have your checking account at, because then you can easily transfer funds should you need access to your savings. Also, if you select direct deposit from your employer, you can always get them to deposit a percentage directly into your savings account, meaning you will never be tempted to touch it!
Another type of short-term savings account is a money market account. These accounts typically deliver higher interest rates than basic college savings accounts, but usually carry monthly maintenance fees. Unless you keep a significant balance in a money market account, the monthly fees may actually be more than the interest you earn. Additionally many money market accounts require a higher minimum balance than other savings accounts.
Money market funds are also great for students and can be opened through a mutual fund company. In addition to yielding higher interest rates than typical savings accounts, money market funds allow you the opportunity to try out the stock market world with little risk.