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*Picks up phone to check bank account...*
*Smiles because it's not a negative amount...*
"Wow, the things I can do with $6.72!"
If I were to hand out a survey to just about anyone with the first question being: Fill in the blank for the following: The college student is _______.
Nine times out of ten, the surveyor would fill in the word BROKE... With the extra one out of ten being the word sad, but that's for another article.
Why is this? Why are college students so "broke?" Yes, school is very expensive, but there are ways to get tuition covered without touching your own income (read about how to pay off your tuition in my article "How to Not Fret About College Debt"). The real reason is the following.
Most students going to college aren't aware of how to save correctly. If you're thinking about saving as a piggy bank that you store a fixed amount into every month, then you're doing it all wrong!
Everyone has heard "make sure to save," but today we're going to go into how to save smart, instead of just saving. Saving $20 a month is great... But saving $20 a month with added interest is even better!
What do I mean by this?
Say you stop buying coffee every day and instead save that $5 every single day! You put it in your savings account with an interest rate of about .01 percent (the crappy average interest rate for a bank savings account). Each year you're saving $1,825! In 42 years that will turn into $76,650! Wow, that's a lot of money, huh? The answer is NO. Saving until you're in your sixties to get $76,650 is chump change compared to the amount you could have been saving with a high-interest account.
So what is a high-interest account?
There are online banks that have high-interest savings accounts, meaning that the more you save, the more extra money gets added yearly! Online banks are able to supply their users more added interest since they don't have the overhead fees of running an actual brick-and-mortar location. There are many online banks to choose from including ones like AXOS bank, Marcus bank, Ally bank, and more! The top things to look for when searching for an online bank with a high-interest savings account are the following:
- Is it FDIC insured? Meaning are you insured for up to $2 million... Is your money safe with them, basically!
- How long have they been opened? If they've been open for a while now and have established themselves, they are probably in good shape!
- Is it compounded daily? You want your interest to be compounded DAILY in order to gain the maximum amount of money possible.
Now say you've found a tremendous online bank with a high-interest rate of ten percent! Let's take that same $5 a day you've been saving and put it in this high-interest savings account. In 42 years you now have one million dollars saved up, and if you want to get that sooner, double it to $10 a day and save a million dollars in 21 years instead! Putting a million dollars in your pocket from saving $76,650 seems much better than money just stagnantly sitting in your low-interest savings account. AND THIS IS JUST PART OF YOUR SAVINGS! Your savings should be diverse.
What do I mean by diverse?
To have a diverse account means you're not placing all your eggs in one basket, or in this case all of your money into one savings plan! It is important to also have things like a CD, investments in the stock market, cash, and different savings plans. Read my next article to come out about getting in the stock market in your 20s!