When students enter college, they encounter a lot of new and sometimes complicated financial responsibilities. On top of raising money to pay for tuition, looking for scholarships, and taking out student loans, is it a good idea to try and start a savings account? Yes, you can and should start a savings account while still in college. But first, you need to understand what this kind of account is, and what the benefits are.
What Is a Savings Account?
A savings account is like a piggy bank but with some additional benefits. Like a piggy bank, savings is a place where you can stash away any extra cash that you have. This helps to curb impulse purchases since it’s not as easily accessible as a checking account.
The difference is, a savings account does more than just keep your money safe. It also helps your money grow. Think of it as an investment. You earn interest on whatever money you deposit into a savings account. The longer your money stays in the account, 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.
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 Start a Savings Account as a College Student?
If possible, yes!
We know it’s tricky when you’re first starting out on your financial feet—especially with student loans thrown into the mix. However, college is a great time to start building up a savings, even if it’s little by little. 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.
Most people don’t think about setting aside money for emergencies. This can be an expensive mistake. Without emergency funds, when you do need money urgently, your only recourse is to take a high-cost loan. You never know when you may need money to pay off medical bills or car repairs. Having a savings account will make it easier for you to get immediate funds to cover those unexpected expenses.
How to Start a Savings Account
Starting a savings account is easy. Most banks allow you to open an 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.
Whether you’re opening the account online or in person, you will need to provide your Social Security and state ID numbers. If you are employed, you will also need to provide your employer’s information.
Most banks will ask you to make an initial deposit to activate your account. 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.