Many students will earn an income or obtain monetary gifts during college. You may work part time or full time. Parents, relatives and friends could provide you with cash from birthday gifts, Christmas, or just because they love you. Opening a savings account could allow to save your money instead of spending it immediately. This extra money could be used for emergencies or to pay down student loan debt. A savings account for college students may be available through a financial institution or credit union.
How to Choose a Savings Account for College Students?
You may choose a student saving account based on your personal financial situation and for convenience. Four other things you should consider in a savings account are great interest rates, low monthly fees, ATM and online banking access.
Some banks are regional and only have a limited range of access to ATMs. Other banks are global and have locations nationwide. Having a bank that has a large coverage allows college students to have unlimited access to their funds. You may then access your money through an ATM in emergencies without traveling long distances. The bank you choose may typically offer free ATM access. Yet not every ATM is in the bank's network.
For non network ATMs, you may have to pay a fee to use the machine. The fee amount may be shown on the touchscreen or on a paper attached to the machine, according to the CFPB. Fees may vary, typically from $2 to $3. In addition, the type of account tier that you choose could offer varying access to your accounts. You may only be able to access your checking account through the ATM.
Using an ATM is simple. Place your ATM into the slot and tap on the screen to enter your card PIN. Then you may select to access your checking or banking account. You could pull up account balances, make deposits or take out cash. Then you may indicate whether you want a receipt when you are finished accessing your account.
Online and Mobile Banking
Many banks are now offering online and mobile banking features for account holders. The mobile app allows you to access your bank information online through an Internet browser. So you could see your account on a computer, laptop or phone. This online access is helpful for college students who have varying class schedules. Depending on the bank, you could check your balance, make transfers, and track withdrawals.
Some banks offer online college savings accounts. These accounts may offer no monthly maintenance fees and no minimum balances. The savings accounts may also earn variable compounded interest. Their interest is usually better than traditional banking institutions. To create an account, the bank may request some personal contact information, a social security number, and some funding to open an account. You may still receive a debit card/credit card
Your savings account could offer an interest rate that will help you build up your savings. The money that is in the account becomes compounded. This factor means that the longer the money is kept in the account, the more you may potentially earn in interest. Interest rates may vary based on the bank and where you may live. There may also be a minimum balance amount required. Here are the annual percentage yields (APYs) for 5 banks that offer savings accounts as of June 2020.
The APY rates shown above may vary over time.
Low or No Fees
You typically don't want to have your savings account drained from maintenance fees or overdraft fees. You may pick a savings bank account that offers overdraft protection, no maintenance fees and alerts when withdrawals exceed limits. These features take away a college student’s worries. You could bank with confidence while better managing the account.
How Do You Open a Student Savings Account?
Opening a savings account is relatively easy. First, you may have to decide whether you plan to open one in person or online. If the bank is regional and near the college, you may have to open it online if you don't live close enough. The participating bank may request a range of identifying information and documentation. Here are some of the standard requirements:
- 1 or 2 types of state issued identification (driver's license, passport, etc.)
- Social security number
- Date of birth
You may also need to decide whether it is a single account or a joint account. Some college students could open up a joint savings account shared with a parent to make direct deposits easier. Afterwards, you could place in the required minimum amount or more and submit the application. After the account is open, you may set up certain features such as auto transfers, receiving estatements online, or set up auto payments for expenses.
Why Should You Start Saving Money for College?
It's never too soon to start saving for your college education. Starting a savings account may allow you to save up funds when scholarships or grants do not cover the whole college amount. Another benefit is that you could start paying off student loans. Saving early for college also allows you to save money in case of emergencies. You may encounter emergencies while at college. Your car could break down or you may become involved in an accident. Creating an emergency fund may allow you to pay for any unexpected expenses that could arise.
A savings account may help reduce your college expenses. In addition to tuition and books, there is also room and board, meals and transportation costs. You may also have to pay for an apartment if you are not living on campus. The NCES reported that the average costs of a 4 year public college during the 2016 to 2017 school year were $17,237. The average costs of a private for profit institution during the same year were $25,431. Private nonprofit colleges had the highest expenses at $44,551.
Types of expenses that you could use an amergency fund for include medical expenses, car repairs, home repairs, and daily expenses from a job loss. Lastly, you may want to start saving money early to attend a college that fits your academic achievements and goals. You could save enough money to attend the programs that meet your educational and career goals.
What Kind of Savings Accounts are for College Students?
Every student's situation may be different. What is right for one person may not be right for you. You could select an account that is flexible. More features could be added to reflect your financial needs after college. Here are some accounts you could select:
- Discover Bank: Discover offers online savings accounts. There is no minimum amount to open and no monthly fees. The APY is 1.05%.
- Barclays Online: Barclays offers online savings accounts with no minimum amount. It allows for instant transfers between banks. The APY is 1.00%.
- HSBC: HSBC offers and everyday savings account with no minim balance. You may access mobile banking options. The APY is 0.01%.
- PNC Bank: PNC bank offers a student savings account virtual wallet. It's three accounts (savings, checking and reserve) in one. You may automate your savings to better manage your money. There are no fees for 6 years. The APY is 0.03% for $2,499 balances or below and 0.05% for higher balances.
The account offers, features, and APY rates may vary over time.
Are There Other Savings Options for College Students?
There are also college savings plans for families. These plans allow members and relatives to contribute certain amounts. In addition, some college plans may not be taxed on a family's earnings. Here are three different types of college savings plans.
529 Saving Plan
This savings plan should offer special tax benefits. The earnings are not taxed so long as the funds go toward education expenses. Each state may sponsor one to two 529 plans set up for families. Two types of 529 plans are prepaid tuition plans and education plans. Prepaid tuition plans are designed to allow people to cover the tuition cost of college. Education plans aims to allow a person to open an investment account. This investment account could be used by the beneficiary for future college qualified payments, such as tuition and room and board. A con with 529 saving plans is that fees and expense for the account may vary. These is also a 10% penalty for funds that aren't used for education expenses, according to the US Securities and Exchange Commission
A Roth IRA is an individual retirement account that allows for qualified withdrawals. These withdrawals are tax free based on certain circumstances. While commonly used for retirement savings, it could also be used for college savings. One of the pros is that there are no taxes or penalties for qualifying withdrawals. However, if the money is used for financial aid, Roth withdrawals could count as income.
Coverdell Education Savings Account (ESA)
The Coverdell Education Savings Account is a trust account. It could pay qualified education expenses for college students. You may contribute up to $2,000 per year to the account based on income. The interest earned is free from federal taxes. In addition, the beneficiary has to be below 18 or have special needs for the account to be opened. Overall, there are many types of savings accounts and plans for college students. You may select the one that is right for you.