Savings and Checking Accounts in College

Some of the most fundamentals aspects of personal finance are savings and checking accounts at the local bank; however, a lot of college students don't really know how to utilize them properly or even how different rates can affect their money. Knowing these differences can save you a whole lot in the long term.

Checking vs. Savings

These two types of accounts are the most common in local banks. A checking account is used to pay off everyday purchases and is typically linked to a credit card while a savings account is used to save and grow money over time. Savings account will generally have higher interest rates than checking accounts and savings are one of the most liquid assets you can have, meaning it is very easy to convert money in the savings account to other forms of money such as cash and bonds.

Different Interest Rates

Different banks offer different interest rates for savings and checking accounts, and being aware of it can help you optimize your finances. The site Bankrate.com shows the bank interest rates from all over the country for both checking and savings accounts as well as credit card rates, personal loan rates, and mortgage rates.

A slight difference in interest rates can potentially earn or lose you a good sum of money. If you initially have $1000, deposit $100 monthly, and the choice between two savings accounts that have rates of 2.25% and 2% APY, after 10 years the account with 2.25% will have $14,676.56 while the account with 2% will have $14,478.68, a difference of $197.88. A small difference of a quarter of a percent in interest rates yielded almost two hundred dollars.

CD's

CD's (certificate of deposits) are financial products that freezes the money you invest in it in exchange for allowing you to earn higher rates of interest on that sum of money. Banks will typically give you higher rates on CDs than with checking and savings accounts, and using a CD can help you grow your assets faster than savings accounts or even stocks. You can use Bankrate.com to find and compare CD rates from banks all across the United States.

Having the knowledge of savings and checking accounts can better equip you to take control of your finances.

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