Why College Students Should Consider Having Both Checking and Savings Accounts

Transitioning from high school to college involves making numerous decisions, including which school to attend, where to live, and what type of bank accounts you’ll need. While having both a savings account and a checking account during college isn’t essential, it can significantly simplify managing your finances. Here’s what you need to know.

Benefits of Having Both a Checking and Savings Account

Opening both a checking and savings account isn’t necessary, but it can be beneficial because the two accounts serve different purposes. Checking accounts are ideal for everyday transactions and paying bills, while savings accounts are better suited for long-term savings goals.

Checking Accounts

Think of a checking account like your wallet, used for everyday transactions such as paying bills, making purchases, and withdrawing cash from ATMs. Here are some key features:

• Unlimited withdrawals and transfers
• Direct deposit for paychecks
• Online bill payment
• Linking to payment apps like Venmo or PayPal
• Typically, no interest earned

Savings Accounts

A savings account is like the adult version of your childhood piggy bank, a safe place to stash cash for future goals or emergencies. Key features include:

• Not used for paying bills or making purchases
• Interest earned on deposits
• Limited withdrawals or transfers per month

Pros and Cons of Having Both Accounts

Having both a checking and savings account can be a smart move, but it’s essential to weigh the pros and cons.

Pros

• Compartmentalizes finances, making it easier to manage money
• Provides a psychological barrier against frivolous spending
• Interest-bearing savings accounts can grow your savings
• Overdraft protection from linked accounts

Cons

• May require maintaining a minimum balance to avoid fees
• Need to track each account’s balance and associated fees
• Monitoring two accounts is more complicated than one

Choosing the Right Bank

When selecting the best bank as a college student, there are many options to consider:

Traditional Banks

These typically offer a wide range of services, convenient mobile apps, and plenty of branches and ATMs for easy in-person banking and cash access.

Credit Unions

Member-only institutions that often offer lower fees and higher APYs than banks but usually have limited digital banking features. Branches may be limited to one region, which can be problematic if you’re attending college far from home.

Online-Only Banks

These have no physical locations and generally offer higher APYs, minimal or no fees, and a robust online and mobile banking experience. Just make sure you can contact the bank for help with your account.

Evaluating Financial Institutions

To evaluate financial institutions, compare these features:

• Fees: Look for accounts with low or no fees to suit your student budget.
• Minimum balances: Banks may waive fees if you use direct deposit or keep your balance above a minimum.
• ATM availability: Find out which ATM networks you can use without paying fees and whether there are enough ATMs near your home and campus.
• Locations: Ensure there’s at least one branch near your school and your home.
• Interest rate: An account’s APY can significantly impact your savings in the long run.
• Online/mobile banking features: Should be user-friendly with all the tools you need to manage your money on the go.
• Protection: Ensure deposits are federally insured so your money is safe.

Opening a Bank Account

Opening a checking or savings account usually requires filling out an online or in-person application and providing:

• Valid government-issued ID
• Social Security number
• Birth date
• Contact information
• An initial deposit
• Proof of student enrollment (if opening a student checking account)

Should You Open a Credit Card Account?

Credit cards are a major responsibility; are they right for you? If you’re financially disciplined, a credit card can help you start building credit, making it easier to rent an apartment or get a car loan after graduation. Making small purchases with the card and paying the bill in full every month demonstrates responsibility and helps build a positive credit history. Credit cards can also help you handle financial emergencies, earn rewards, and make online purchases more securely than using debit cards.

Worried about overspending on a credit card? A secured credit card or student credit card with low credit limits or an authorized user account on a parent’s card can offer safer ways to learn credit management.

The Bottom Line

Just like the lessons you learn in class, the money management lessons you absorb in college can set you on the path to future success. Take the time to research different savings and checking account options before deciding which accounts fit your needs. While you’re at it, check your credit report and credit score and set up free credit monitoring to keep tabs on your credit no matter how busy college gets.

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