Do you remember your first day of college? That feeling of excitement combined with trepidation at the idea of embarking on this new adventure that will eventually lead to a new career as well as financial independence? Now, do you also remember the day you had to open your first checking account – one that did not have your parents as joint co-owners? Well, that day might have been less exciting, but it probably held equal amounts of apprehension. In my first assignment as a branch manager in a small college beach town, they allowed me to work closely with students and I soon realized how ill-prepared they were to be on their own – financially speaking. I too was a college student once and so I wanted to share the top four things a young adult should consider before they open their first bank account.
- Know what makes each financial institution different. When I started looking for a job in the banking world, I assumed all banks were the same. Most people have the same approach when it comes to doing their banking. Know that you have options! Online tools make shopping for a bank easy. Things you’ll want to research and compare include fees, interest rates, online and mobile monitoring options, branch proximity and ATM locations.
- Know what fees you can anticipate. Banks charge fees – and lots of them. Using another bank’s ATM? Picked the wrong checking account and now you are paying monthly fees? How about that savings account? There is a limitation to how many withdrawals or transfers you can do a month – the number is six – before fees get assessed. And my favorite… “ I can’t be out of money – I still have checks!” Make sure that when using your debit card or paying your bills online, you do not exceed your ability to pay for them. In the event you forget, the bank won’t and you’ll be charged non-sufficient funds or overdraft fees.
- Know what you need. Remember that talk your parents had with you about “wants” versus “needs”? Well, that conversation definitely comes into play here. You should only borrow what you absolutely need. The banker will eagerly want to sell you on a credit card, but from my personal experience, stick to a secured credit card as that will not only help build up your credit score but it will also help not overspend due to its small credit line. Most students are not great at budgeting and recovering from bad credit or handling repayment due to high-interest rates is no fun.
- Know how to pay yourself first. By paying yourself before others, you are building the habits and discipline it takes to gain peace of mind with an emergency fund, saving for large purchases, and invest for long-term wealth building. First, start with a savings account – preferably not at the same bank as the one you have your checking. Next, set up an auto-transfer between your accounts on a monthly basis. This will kickstart your emergency savings account.
Regardless of where you are in this process, I leave you with this: research, read the fine print, and track your spending. Happy Banking!