College offers students many unique opportunities for novel experiences and personal introspection. Many who attend college find that those experiences change them for the better; improving their self-awareness and understanding of the world at large. However, the college years are more than just a time to gain valuable job skills or a deeper appreciation for an academic subject. College is the beginning of adulthood, and as such college students should utilize their time in college to develop healthy habits that will benefit them for the rest of their lives. Perhaps one of the most essential skills to develop while in college is sound money management. Money, like driving a car or the opposite sex, is just one of those things in life that you need to understand in order to be successful. Opening and maintaining a savings account while in college is a simple yet effective step that will go a long way in building financial discipline.
A savings account offers several advantages to those who have one. First, it allows you to have money set aside specifically for emergencies. This is also known as an emergency fund. The simple truth is that emergencies will happen in life: you run over a nail on the road and need to replace the tire, an unexpected illness, or a surprising hike in tuition. As the previous examples illustrate, the problems life throws your way can become quite expensive costing you hundred of extra dollars you didn’t intend to spend. That’s where an emergency fund come in, since you already have some money put away you are better able to weather the storm of life’s mini-financial crises. Most financial experts agree that you should have at least three to six months’ worth of living expenses in your emergency fund to be prepared, because some emergencies will last longer than others or simply cost more. Additionally, a savings account is the perfect place for an emergency fund. A savings account gives you easy access to your money with most offering check-writing or debit card privileges and not charging you fees to withdraw funds unlike most other long term investments such as bonds and CDs. This fluidity allows you to deal with an emergency as soon as it strikes and hopefully bring it to an end sooner.
Another positive reason to maintain a savings account is that it allows you to set savings goals by affording you a space to deposit funds while saving for bigger purchases. Maybe you want to go on a weekend road trip with friends, attend a concert, or buy a new laptop. All of these things cost money. Rather than spending any money you have available, the wisest thing to do when contemplating big purchases is to save for them and buy after you’ve acquired the necessary funds. This practice gives you the opportunity to ask yourself if you really need that particular big ticket item before you buy it. In the end it keeps you from overspending and running out of money. A savings account complements this fiscal discipline beautifully. You can put a small portion of a paycheck away in the account each time you receive money and eventually, with enough time, you will have the cash you need built up in your account. Additionally, savings accounts earn interest compounded on the amount deposited in them. In theory, this means you could reach your savings goals faster since the more money deposited in the account, the more interest earned off of that money.
In terms of personal savings goals, my main priorities focus on life immediately after college. I save portions of my paycheck to make a significantly larger first payment on my student loans once they come due. Additionally, after college I’ll need a better car than the one I have now. So I save other parts of my paycheck now in the hopes of making a substantial down payment with trade in on a future car. My saving account is invaluable in helping me realize my financial goals both now and in the future.
This essay was written by Russell Vahrenkamp for FTWCCU’s Cash for Class contest. Russell, a sophomore at Texas Christian University, is studying nursing.