What Is a Savings Account?

A savings account is a type of bank account that acts like an advanced, interactive piggy bank with some additional benefits. Like a piggy bank, you can stash away any extra cash you have into your savings account. The difference is, the money is not in your direct possession at home or in your wallet. Instead, the bank where you open your account will hold it safely for you. They will even pay you interest on the balance in your account for as long as it stays in your account. 

This money is easily accessible to you any time you want it. When you start a savings account, the bank will give you a debit card. You can use this debit card to withdraw cash at any ATM. If the bank branch is close to your campus, you can withdraw cash by visiting the branch personally and filling out a withdrawal slip. Whichever withdrawal option you choose, you’ll get the money instantly. 

The only limit is you can only withdraw as much as you have in your account.

Benefits of Starting an Account

Though the interest rates are generally low, the benefits far outweigh this one downside. For one thing, starting a savings account is a low-risk investment. You can be sure your money is safe. Secondly, you can withdraw whatever amount you need whenever you need it without paying any penalties. This makes cash available to you instantly in case of any emergency or big purchase.

Should You Open a Savings Account as a College Student?

You know you can open a savings account. But maybe you’re wondering, ‘should I open a savings account in college just because I can?’ Again, the answer is YES, you should.

Opening a savings account in college or at any time offers some unexpected benefits. 

For one thing, it acts as a safe place to keep your money. Your wallet could get lost. Money kept in a drawer at home could get robbed. But money in your savings account cannot get lost or stolen as it is safeguarded by the bank. 

Secondly, it helps to curb impulse purchases. It’s easy to give in to impulse purchases when you can simply whip out your wallet and pay for it. When you keep your money in a savings account, you have to first withdraw cash to pay for the purchase. More often than not, by the time you get to an ATM, you find you don’t really need or want that item anymore. You’d be surprised at how much money this can save you!  

In addition to keeping your money safe, a savings account also helps your money grow. Think of it as an investment. You earn interest on whatever money you deposit into a savings account. Interest rates on savings accounts tend to be low but it adds up over the years. The longer your money stays in the account, the more interest you earn and the more your investment will grow. This helps you grow your income slowly and steadily. It’s a great way to save for a short-term financial goal. 

There’s no doubt, college is a great time to start building up savings, even if it’s a little at a time. Every dollar counts, and a savings account can help build up your wealth via interest. It’s a great place to learn financial discipline as well since it’ll require some budgeting. 

The fourth, lesser-known benefit of opening a savings account in college is the ability to get a secured credit card. While you’re in college, your thin credit history may make it difficult to get a regular credit card. However, the bank holding your account will issue you a secured credit card based on your savings account. The credit limit on this card will be the amount that is in your account. You cannot use more than that. The benefit of getting a secured credit card is the ability to start building your credit history while you’re still in college. 

You know how a savings account works and the benefits of opening such an account in college. The next step is to learn how to start a savings account. 

How To Start A Savings Account: Step By Step Breakdown

Step 1: Decide on the type of savings account 

Many banks offer student savings accounts in addition to regular savings accounts. If you haven’t had any earlier experience with savings accounts, it’s best to choose a student savings account. 

Student savings accounts offer a variety of perks that are not available with regular savings accounts. They are specifically designed to make it easier for students who are typically on tight budgets. 

Student savings accounts have a lower monthly deposit requirement and no minimum balance. In addition, the monthly fees and ATM fees may be lower or in some cases, waived completely. Many banks also offer a variety of bonuses and rewards if the account holder meets certain requirements. You may also be eligible for overdraft protection or overdraft forgiveness. These perks are typically not available for regular savings account holders. 

Any individual enrolled as a student is eligible to open a student savings account. These may or may not be subject to minimum or maximum age restrictions. If you’re ineligible because of age, you will still be eligible to open a regular savings account. 

Step 2: Determine which is the best bank to start a savings account 

There is no one best bank to start a savings account.  Eligibility requirements, rewards, and other terms and conditions vary from one bank to another. That’s why it’s so important to take some time to research different banks first. Comparing the features and benefits offered by different banks will ensure you’re choosing one that best suits your unique needs. 

These are some of the features and benefits to look at when comparing savings bank accounts: 

Minimum balance: Every bank imposes a minimum balance that you’re required to maintain in the account. You may be charged if the balance falls below the required minimum. It’s best to look for a bank that has a low minimum balance requirement. 

Annual fees: Most banks impose an annual fee on regular savings accounts. This fee is waived on a student savings account. However, this is not written in stone. The fee structure and amount could vary from one bank to another. You do want to check so you’re not paying exorbitant annual fees unnecessarily. 

Perks: Banks offer a variety of perks to entice people to use their services. Some may offer cash back or reward points on purchases made through certain merchants. Others may offer discounts on certain services such as overdraft protection or ATM usage, which usually carry a fee.  

Signing bonus: Yes, some banks offer free money to all new account holders. This could make a big difference and is something to look at when starting a savings account. 

Think about your financial circumstances and how you plan to use the account. This will help you choose a bank that works best for you. 

Step 3: Keep everything ready to open your account

Once you’ve identified the best bank for you, it’s time to gather all the requirements documents. Most banks will ask you to submit these standard documents: 

Personal identification: For this, you’ll need to submit a valid, government-issued photo ID. This could be your driver’s license, state ID card, or passport. You will also need to provide your Social Security number. 

Proof of residence: Your campus address will suffice as proof of residence if you’re opening a student savings account. For a regular savings account, you may need to submit a recent bill or credit card statement.

Proof of school enrollment: This is only necessary if you’re opening a student savings account. 

In addition to the above documentation, most banks will also require you to make a minimum initial deposit to open an account. This will vary from bank to bank. 

Step 4: Open your savings account

You can either open an account online or by visiting the bank. If you choose to open your account online, you can complete the whole process without going to the bank personally. However, if this is your first savings account, you may feel more comfortable getting some hands-on help. In that case, just go on over to the bank and open an account in person. The process is quick and easy.

At the bank, a banking representative will help you start a savings account. They will first give you an account opening form to fill out and make copies of your documents. Once all the formalities are complete, your savings account will get activated right away. You will then need to make that first deposit. Most banks will ask you to make an initial deposit to activate your account. In most cases, you can do this with as little as $1. This makes it easy to start an account right away and then keep depositing money into it as and when you have some spare cash.

The representative will explain exactly how your account works and how you can make the most of your account. They will also help you understand how to minimize the fees and penalties. While at the bank, you can fill in a form requesting a debit card and checkbook right away. These will be sent to the address you’ve provided after a few days. 

Final thoughts on ‘should I open a savings account in college?’ 

Though the interest rates are generally low, the benefits of opening a savings account in college far outweigh this single downside. For one thing, starting a savings account is a low-risk investment. You can be sure your money is safe. Secondly, you can withdraw whatever amount you need whenever you need it without paying any penalties. This makes cash available to you instantly in case of any emergency or big purchase.