Young people aren’t typically known being financial savvy. Scan various headlines and you’ll read that millennials and Gen Zers are killing industries or otherwise mismanaging their money.
But in a new DepositAccounts survey, we’ve found that today’s college students may be better at saving their money than we thought. Not only are college students saving their money, but many are funding their own tuition payments, living expenses and emergency funds.
Let’s take a deeper dive into the money management habits of today’s college students and find out what they may still have to learn.
- 1 in 3 (34%) college students have at least $1,000 saved. This compares with 11% who have nothing saved.
- Nearly 44% of college students are saving for tuition payments. When looking specifically at students with loans, that number jumps to 51%. Meanwhile, just 35% of respondents without loans are saving for tuition.
- A higher percentage of students from low-income families are saving for tuition and emergencies over college students who categorized their family's economic status as about average, high income or not sure. Although high-income college students and families are still saving for tuition and emergencies, these students were found to have saved more than the other groups for things such as electronics and concerts.
The discrepancy between high- and low-income students is most noticeable when looking at saving for tuition and cars. About 52% of low-income students responded they save for tuition, compared with 42% of high-income student respondent. In reverse, high-income students have a 10% lead over low-income students when it comes to saving for cars.
There’s a slightly higher percentage of low-income students who aren’t saving their money compared with their high-income counterparts. This is likely due to the lack of discretionary funds their low income allows.
A closer look at how college students manage their money
About 64% of college students have a separate savings account, showing some awareness around money management. Looking at it further:
- 17% keep their savings in their checking account
- 10% don’t have any savings at all
- 9% don’t keep their savings in the bank
About half (49%) of college students say they primarily chose their bank because their parents use the same one. While that’s the easiest route, it shows that many college students — and potentially their parents — are missing out on easy savings from the best savings accounts.
Perhaps contrary to popular belief, only a small percentage of college students indicated technological aspects, such as mobile banking and online reviews, as their reason for choosing a bank.
Students from high-income families are twice as likely to have a joint bank account with their parents than students from low-income families. One in 5 (21%) high-income students have a joint account with their parents, compared with just 1 in 10 low-income students.
More than 56% of college students with loans use their school’s preferred bank, compared with just 34% of students without loans. This is likely due to the ease of branch/ATM access and more convenient financial aid distributions.
Interestingly, there’s a higher percentage of students with loans (93%) that have a checking account, compared with the 80% of students without loans that have one.
- In total, 87% of college students have a checking account, and 78% of those students are the sole account holder. About 17% share a joint account with their parents.
- As for how these college students spend their money, debit cards are the most popular payment method for 53% of college students, followed by cash (25%) and credit cards (19%). Just 3% say mobile payments are their primary payment method.
Unfortunately, it looks like college students still have some learning to do when it comes to bank accounts. Four in 10 get charged fees from their bank, while 13% say they have no idea if their bank charges fees. Fees can be easily avoided, especially when you want to make the most out of your savings with the right account.
How to boost your college savings
No matter where you are with your savings, there’s always room for some financial improvement. If you’re a beginner with no savings at all and you don’t know where to start, there are some easy fixes to help you get on track. Even if you’re part of the 34% of college students with at least $1,000 in savings, you may still find the following advice applies to optimizing your savings strategy.
Open a high-yield savings account
Generally, you should be looking for a savings account with a 2% APY or higher.
When you stick to the bank your parents have or the one with on-campus branches, you can often miss out on better savings. Most big banks offer a mere 0.01% APY on their savings accounts. This is well below the national average savings rate of 0.28% in July 2019. However, even the national average fails to illustrate how high savings account rates can go.
A high-yield savings account at 2% can grow a $1,000 balance by $20 in a year. A 0.01% interest rate would earn you a mere 10 cents in that time.
Set up automatic recurring deposits. An easy way to take further advantage of a high-yield savings account is by setting up automatic recurring deposits. The $1,000 example above assumes you don’t make any monthly deposits into the account. But with a $25 deposit into your 2% APY account each month, you’ll have $1,323 after a year.
You can make your monthly deposit whatever amount you like. It doesn’t have to be $25. Set aside what you can, even if it’s just $5, and you’ll be surprised at how much better your savings look.
Enlist the help of money management apps. There’s an app for just about everything nowadays. Using a finance app can help you better calculate and keep track of your savings.
Budget apps such as Mint help you visualize your budget. You’ll see how much money is coming in and what should be spent on certain categories, such as groceries and entertainment.
Simple is a mobile-first bank that keeps your checking and savings in one place. It allows you to set recurring expenses, such as bills, so that you know how much is safe to spend. Plus, its saving feature lets you compartmentalize each savings goal you have, making it easier to keep track of how close you are to reaching each one.
Other apps, such as Joy and investing-focused Acorns, can help make growing your money a bit more fun considering their easy-to-use features and friendly interfaces.
Watch out for credit cards. If you want to keep your savings on track, avoid spending on credit when you can. It can be easy to pull out that small piece of plastic knowing you won’t have to pay for the purchase right away. But operating in this mindset can be dangerous, especially if you don’t pay off your entire credit card bill on time.
Carrying over a balance from pay period to pay period allows that balance to accrue interest. Unlike a savings account, that’s not a good thing. That means you have to pay more in the end instead of saving. Also, if you make a late payment even once, that interest rate gets hiked up so that you end up accruing even more in interest.
Spending on debit allows you to better see what you’ve spent and how much is truly left in your account. It also avoids the risk of accruing interest and falling into debt.
DepositAccounts by LendingTree commissioned Qualtrics to survey 969 college students — 894 of whom have a bank account. The respondents were asked to describe their family's economic status while they were in high school. No criteria was provided to respondents on how to select a status. The survey was fielded online from May 21-22, 2019.