Growing up is scary. As I hit new milestones, I’m met with more responsibilities to take on, and becoming a college student was no exception. At some point in our college journey, we’re expected to have most things figured out and know how to manage our lives. Of course, registering for classes and finding a balance between jobs and schoolwork is stressful, but the one topic that seems to be the ultimate stress-inducer is personal finance and building a healthy relationship to money.
This may be true for many students who weren’t exposed to discussions surrounding money at the dinner table, myself included. My earliest memory of money is getting my first piggy bank and stashing any spare change I could find around the house so I could buy a new toy. While my mom stressed the importance of always saving some money for the future, I was never taught the special hacks to save more money or how to invest, let alone what that meant.
In a moment of curiosity, I began searching for the golden rule when it came to saving, budgeting, and investing, and was met with a slew of information. I remember watching hours worth of YouTube videos and checking out library books to make sense of the language that was being thrown at me. This process was daunting, and I started to question whether obtaining financial health was even possible for me. Even now, I still worry that I’m making the wrong decisions and am setting myself up for failure in the future. If you are in a similar boat, I’m here to reassure you that it’s okay. If you’re reading this article, you’re already 10 steps ahead of the game because you’re curious and want to make changes in how you approach your paychecks. To get to where you want to be, you have to start somewhere, and it’s never too late to start.
Checking Accounts
The first order of business was tackling the place where my paychecks are deposited: my beloved checking account. When the cash hits my bank, it’s easy for me to immediately think of what I can spend it on. Maybe it’s the cute pair of sneakers I saw at the store the other day, or the full cart of clothes that’s waiting for me to hit purchase online. When I have these thoughts, I try to challenge them, and instead think of what I can save it for (I’ll expand on this later).
To limit my spending, I decided to set up an automatic transfer from my checking account to my savings account. This didn’t require visiting the HR department at my job and filling out a new direct deposit form, although that is an option. I was able to set this up directly in my bank app, and I have the transfers occur every two weeks. This way, I never have to question whether I’m going over my budget or not saving enough money because it’s done for me. When you make the process automatic, you’re less likely to default on putting some money aside for future expenses. This can apply to money that needs to be saved for monthly bill payments too.
You can start small and create a realistic goal that makes sense for your current situation. For example, when I first started saving regularly, I told myself that I would save (automatically) $30 every two weeks. As time went on, I slowly increased this amount. I’m not saying that you need to start with $30 – you can start with $5 and work your way up from there. I found it extremely helpful to go through my bank statements to get an idea of how much money I was spending in each category, like food/groceries, transportation, utilities, etc., and come up with ways that I could cut down my spending. When you do this, you’ll be surprised to see how much money is being spent on things you may not actually need. Personally, I was spending too much money on boba (sorry, wallet!). Also, some banks will pay you interest on the money that you have in your checking account, which is a steal.Â
Saving Accounts
Ah, yes. My favorite topic – savings accounts. You may have heard the words “interest” and “APY” being thrown around. The truth is, compound interest is going to be your best friend here if you’re trying to grow your money. Banks and credit unions will pay you at specific times throughout the year just for banking with them in the form of interest. The key is choosing a bank that will pay you more than others simply for having money in the account. According to Bankrate, the national average interest rate for a savings account is around 0.61% – bummer. This is the equivalent of finding pennies under your couch cushions, and honestly, you’ll probably have better luck there. Some banks have interest rates upwards of 3% to 4%! These accounts are known as high-yield savings accounts because the more money you have in them, the more money you’ll earn.
I love creating multiple savings accounts or “savings buckets” catered to my specific saving goals. For example, I have separate savings accounts for my emergency fund, fixed monthly expenses, and vacation fund. I prefer having my money organized in this way so that I can see exactly where I’m at in each of my savings goals. I highly recommend doing this if you’re saving up for a graduation trip or a new car!Â
One of the best things I’ve done for myself is opening the savings accounts for my long-term savings goals (my emergency and vacation funds) with a bank separate from the one that I have my checking account with. If the money is out of sight, it’s out of mind. I find that I reach my savings goals quicker when I don’t see the accounts every day, because if I did, I may be tempted to use the money for other things that I don’t need and compromise my progress.Â
The last thing I’d like to mention is investing. I encourage you to find information about how to make smart investing decisions by reading books about it and reaching out to brokerage ambassadors who can simplify the process. The reality is that investing is crucial to building wealth and being able to retire one day.Â