With the opening of school just around the corner, whether you’re a high school junior or senior, or heading off to college for freshmen year, it’s a good time to get started in banking if you aren’t already.
One of the first steps toward financial independence is having a checking and savings account because they are essential to handling your money.
Here are a few key considerations when you’re a newbie to banking.
Which type of account?
You might choose a custodial account, where the account is managed by an adult (usually the parent) for a minor under the age of 18 to 21, depending on your state’s law. If you want to check out some pros and cons of custodial accounts, go to www.fairmark.com/custacct. Or, if the teenager is ready to stand totally on their own two feet, then they can open and manage their own account.
Look for these letters
There are two four letter words you want to see FDIC or NCUA insured. This means the bank or credit unit is properly insured by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA). Your bank account is safe up to at least $250,000. To verify the status of your banking institution, go to fdic.gov or ncua.gov.
Be fastidious about fees
Check out fees. Read the fine print. Most big, national banks don’t offer completely free checking accounts any more, says Michael Solari, a certified financial planner and principal with Solari Financial Planning.
"Wells Fargo’s basic checking requires you to keep a $1,500 minimum balance in that account, for example. Go under that balance and you’ll be charged a fee. Look for accounts that won’t charge you to keep your money there. Credit unions or online banks may be a good place to start looking," says Solari.
Similarly young adults should beware of overdraft fees. They can cost you anywhere from $15-$30 per purchase. "Many feel like they need overdraft protection services from the bank, but this can cost you," explains Solari, who says to skip the protection and avoid overdrafting your account by creating a budget that you can stick to and by monitoring your money regularly.
Teens may be enthused by the fact that they can get access to their money any place, any time, thanks to ATMs, but remind them that if they use an ATM that’s not owned by their bank or credit union and is out of network, they can be charged a service fee, in addition to a service fee their bank may charge for using an ATM outside the network. "You don’t want to pay $5-$10 to withdraw your own money. Always use an ATM in your network to avoid any fees," says Michelle Schroeder, a blogger at www.makingsenseofcents.com.
Be careful too, about the number of times you transfer money from your savings account. "There could be a limit and a fee attached when you make too many transfers," warns Kevin Matthews, author, Starting Point: How to Create Wealth That Lasts.
Shop for the best student accounts
Some institutions may charge a fee that can typically be waived when certain requirements are met. "TD Bank’s student checking monthly maintenance fees are waived with proof of enrollment in college," says Natasha Campbell, founder and CEO of Lifestyle Success Unlimited, a wealth wellness company that helps people with financial makeovers.
Because students often have irregular income, it’s important to have a flexible balance without penalty. Consider a student account that has no minimum daily balance requirement, says Campbell.
There are many perks for students. "Citibank’s student checking accounts offer fee-free non-Citibank ATM usage. M&T Bank doesn’t charge a fee for overdraft transfers," says Campbell. Navy Federal Credit Union’s Campus Checking doesn’t charge a monthly fee and earns dividends. Capital One 360’s MONEY account, has perks like mobile check deposits, no fees or minimums, and more.
Take advantage of technology
You want a financial institution that can keep up with tech savvy young folks. Look for access to mobile and online banking, a simple bill pay system, account management tools, mobile check deposit, branch/ATM locators and more.
Teens can avoid overdrawing their accounts by setting up email and text alerts so that they’re notified when their account reaches a specified amount.
"These high tech banking features allows easy access, flexibility and smart engagement when managing money," says Campbell.
Getting off to a good start in banking can set the stage for a bright financial future.