Bank Accounts

This page will discuss the differences between teenage and adult accounts*, banks and credit unions, and checking and savings accounts. We'll introduce a few important aspects to consider when choosing a bank, and finally, discuss some habits you can develop to keep yourself financially safe and protected. This page is meant to be an introduction to this topic and contains very important information.

*Even if you already have a bank account, please read this page.

You are the only person alive who has sole custody of your life ... Your entire life ... Not just the life of your mind, but the life of your heart. Not just your bank account, but your soul. -Anna Quindlen
Anna Quindlen is a Pulitzer Prize-winning and #1 New York Times bestselling author. Click the image above for more about Anna.

Adult Accounts

It is incredibly important to make sure you have an adult bank or credit union account that is not tied to any other adult's account.

When a teenager opens an account, it is usually attached to a parent or guardian account. Opening a bank or credit union account requires signing a legal contract, which is hard to do if you're a minor. This means that if you are still using your account from high school, it is still connected to whichever adult helped you sign up.

Why does it matter? Because the adult connected to your bank or credit union account has access to your money AND is still accountable for you. This might not be a problem for you personally, but it can cause problems for students in precarious situations. Here are three examples.

  1. Let's say the adult connected to your account owes money (such as back taxes). Your account will still show up under their name, so your money could be garnished to pay their debts. The connected adult has no control over this action. Imagine having your leftover Financial Aid funds deposited to your checking account only to find the money gone the next day, impossible to recover. It's happened.

  2. What it the adult connected to your account gets into some sort of legal trouble (whether or not they're guilty or charged with a crime)? The authorities could freeze their accounts. If your account is still associated with their name, it will be frozen as well. Suddenly you find yourself with no access to funds and an empty fridge.

  3. This final example is on you. If you run into financial trouble, the adult connected to your account could still be held legally responsible for the debt, even if they had nothing to do with your decisions.

Bottom line: Protect yourself and the adult(s) in your life by opening a new bank account when you're 18.

Choosing a Bank

This can be both a hard and easy decision. Maybe you'll go with the institution you and your family have used for years. Maybe it's time for a change. Let's talk about some basic topics to consider before making your choice.

Banks vs. Credit Unions

Banks are larger for-profit businesses that are often national or international. They have more widespread accessibility and typically have more advanced technology and app offerings. There are smaller, more localized banks as well that also operate as for-profit institutions.

Credit Unions are nonprofit organizations designed to meet the financial needs of their communities. They typically offer higher interest rates on savings accounts and lower interest rates on loans. They also place more emphasis on customer services than their larger for-profit counterparts. There are fewer locations and are typically limited to a certain geographical area.

Both offer a large variety of services, such as checkings and savings accounts, personal loans, and credit cards. One is not necessarily better than the other; they are different entities with different priorities, so make your decision based on your needs and values. Check out NerdWallet's article about banks and credit unions Links to an external site. to learn more.

Availability

If you're going to school in your hometown, this might not be an issue for you. If you're leaving the area, however, think about how accessible your money will be when you're at school.

Does your bank or credit union have an ATM on your campus or nearby? If not, do they have agreements with any banks that do have ATMs that allow you to withdraw money without withdrawal fees? If not, are you okay either paying the withdrawal fees, limiting yourself to getting cashback from the grocery store (hasn't everyone bought a pack of gum just to get $40 in cash?), or not having access to cash?

Does your bank or credit union have a physical location near your campus? If it doesn't, that will probably be fine, but make sure to take care of anything that needs to be handled in person when you go home to visit. 

Online Banks

Options are continually expanding, and even include banks that are exclusively online. These banks typically have some sort of agreement with specific banks for free ATM withdrawal or agree to cover a certain dollar amount in ATM fees per month. You can't deposit cash, but you can set up direct deposit for your paycheck and deposit checks remotely. Two examples are Ally Links to an external site. and Simple Links to an external site.. Simple has the extra perk of being a bank account and budgeting app in one.

Checking vs. Savings Accounts

Checkings accounts are for everyday use. When you use your debit card, write a check, or withdraw cash, that money is pulled from checkings. Money in a checkings account typically does not earn interest. This account is designed for spending. Try to find a no-fee account, and make sure to check your account statements often.

Savings accounts are to save money for other purposes. There is typically a limit on how many times you can access the money in your savings account per month, and some savings accounts have a minimum balance requirement. Find a savings account with no fees and no minimum balance (they exist), and start saving a little bit every month for an emergency. The perk of savings accounts is that they earn interest monthly. It's not much, but if your money sitting in your checkings account, it's not earning you anything.

While you might not have much money to tuck into a savings account as a college student, it's still handy to have one. Let's say, for example, you unexpectedly received $500 back from your Financial Aid and you've budgeted to live without that $500. If it stays in your checkings account, you might accidentally spend it. But if you transfer it to savings, it's not immediately accessible; you'll have to think about it before you dip into that cash.

If you're interested in learning more about the benefits of each type of account, check out NerdWallet's article Links to an external site. on the topic.

Never look back unless you are planning to go that way. -Henry David Thoreau
Henry David Thoreau was a social reformer, naturalist, philosopher, transcendentalist, scientist, and writer. Click the image above to learn more.

Protecting Your Accounts

There are a lot of small habits you can develop to help protect yourself financially. Here are a few we think are important:

  • Cover the machine when entering your pin number at the grocery store or an ATM.
  • Don't make purchases over public wifi. If you didn't need a password to access the wifi, don't buy anything.
  • Make sure a website is secure before making a purchase. There is usually a small icon or the word secure in the top corner.
  • Check your bank or credit union statement regularly, keeping an eye out for purchases you did not make.
    • Look for small purchases with random amounts ($0.96? $1.47?). Scammers will charge small amounts to see if the card works and if you notice before moving on to larger purchases.
  • Never put your credit/debit card number, expiration date, or CVV code in an email.
    • If your bank/credit union seems to be asking for this information via email, contact them by phone or through their app right away. Banks and credit unions will never ask for this information through unsecured channels of communication like email. Receiving this email means a hacker or scammer is involved.
  • Consider using P2P (peer-to-peer) services to make purchases and send or receive money between friends and family. There are several out there; you've probably heard of Venmo, ApplePay, and PayPal, for example. These services tend to add an extra level of security. Be careful of fees, however, and read the terms of use.
    • You usually need to be 18 or older to set up these accounts. If you signed up for accounts for any of these services before the age of 18, make sure you do not need to cancel your account and create a new one. Users have been banned for using accounts they created as minors.

Bottom Line

  • You need an adult account that is not connected to other adults in your life, for your security and theirs.
  • You have lots of options when choosing a bank or credit union. Don't stress out about the choice; spend a little bit of time doing research and then get started.
  • It is your responsibility to keep your financial information as safe as possible. Establish small habits to protect yourself and your accounts.

 

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