Finance 101 Jun19

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Finance 101

• Finance 101: Leaving the Nest in Good Financial Hands •

Students learn so many life lessons in college and one of the most important ones should be how to responsibly handle their day-to-day expenses and money. College is expensive enough that you don’t want good money wasted on unintended banking fees. Helping your child manage their money and setting them up with good financial relationships can be one of the best lessons you can provide.

Banks know that college students are fertile prospects with no prior banking relationships. They also know that many adults trace their banking relationship back to their first account on campus, so setting your student up with an account may lead to a financial relationship beyond college. Do your research and pick companies that have favorable terms for students.

As a parent, here are some things you’ll want to consider:

  • No fees on anything! You don’t want to pay fees on anything. That means no fees on money transfers, no fees for checking, no overdraft fees and no monthly maintenance fees.
  • No minimum balance requirements. Your child will probably be playing it close with how much money they have, so you don’t want to be required to have a minimum balance requirement.
  • ATM freedom.  Students don’t think about where to get money; they just go to the closest ATM. So make sure there are lots of free ATMs on campus or, better yet, find an account that gives free access at any ATM.
  • Online, mobile, and text banking. With technology, your student doesn’t have to rely on physical branches. Having an account with a bank means there doesn’t even have to be a branch in the same city.
  • Debit card. If your student is new to carrying money around, debit cards are a great alternative. They can use their debit card as an alternative to cash (where possible) and keep track of their running balance with text alerts.

So how do you find an account that can offer some or all of the features above?  A good list to check out is GOBankingRates’ recent list of The 9 Best Banks and Credit Unions for College Students.  The usual banks are on the list: Bank of America, Citibank, Wells Fargo; along with the specific account names that are best for students. But don’t be afraid to think beyond a traditional bank when setting up your student financially.

With technology invading all aspects of our lives and businesses, you should also consider using an Internet bank for your college student. I don’t know about you, but the only time I step into my bank is to use my safety deposit box. Other than that, everything I do can be accomplished through my computer, smartphone, or an ATM. Most Internet banks provide all the features listed above that will be important for a student account. For a list of recently reviewed Internet banks check out the 2014 Best Online Bank Reviews and Comparisons.

Another interesting company worth considering for new college students is Simple. They are a “bankless bank.” In essence, they’ve partnered with a FDIC insured bank that doesn’t provide retail services and Simple provides the customer user interface and account features. For college students, Simple can really help students learn to manage their money better with their “Savings Goals” and “Safe to Spend” features:

  • Savings Goals automatically sort your money into categories of your choosing. Students can use this feature to set aside money they need to spend for books, travel, rent, etc. For example, if you know you need to pay $800 in rent every month, you can put aside that money (either every month or for the full semester) in a “rent” category. When you’re ready to spend that money, you just switch on the “spend from goal” option on your smartphone. Money in a goal keeps these funds out of the “safe to spend” amount.
  • Safe to Spend tells you exactly how much money you can spend right now. It factors in any pending transactions as well as savings goals you may have in place.

Personally, I think the “safe to spend” feature is perfect for college students new to handling money. It automatically keeps track of how much money a student has to spend, subtracting any pending transactions and goals that have been determined.  In addition, they have no fees for monthly maintenance, overdraft, ACH transfers, and withdrawals through the Allpoint ATM network (55,000 ATMs nationally).* Right now getting a Simple account is by invitation only, but anyone interested can call Simple at 1-888-248-0632 and they will send an invitation to create an account or request an invitation by clicking here.

Once you’ve gotten your student set up with a bank account, don’t forget to introduce them to Venmo.  This is a free app that links to your student’s bank account or debit card (which will be connected to the bank account). Through Venmo, students can pay their friends for all the little expenses they split, but don’t always have the cash for – late night pizzas, movie tickets, gifts, etc. Money is taken from the linked account (or debit card) and moved to a friends’ Venmo account. Once money is in your Venmo account you can either choose to “cash out” and move it back to your bank account or leave it in your Venmo account for the next time you need to split the tab on dinner out with your friends.

Sending your child off to college is a time of big change – for parents and children alike. Helping them start off their college years (and their adult life) with a solid structure of financial relationships helps them leave the nest with a little head start.  Of course, still expect the occasional phone call (or text) for extra cash to cover unexpected things.

*Simple Fee Schedule

 

Debbie Schwartz is the founder of Road2College, a website and weekly newsletter that helps educate parents on what they need to know about college admissions and financing. From her experience working in financial services, she also enjoys sharing information with parents and students about financial products that are appropriate for a college students’ personal financial habits and covering the cost of college.

 

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