Headed For College: Getting Personal

Personal finances are just that - personal (you) finances (money). Your money: it includes everything from spending to investing and retirement. But when you're heading off to college, your more immediate need is understanding day-to-day personal finance. Checking accounts. Books. Making money. You cannot avoid day-to-day finance. You can learn about it now, or wait until you make a mistake. We suggest now.

The first step is to open a bank account from which you pay your expenses and to which you deposit your income. Otherwise, you have to carry all of your cash around with you or stuff it in your mattress - neither of which are sound financial strategies. Bank accounts also help you track how much money you have. What type of account do you need? That depends on your situation.

Savings account
A savings account isn't the only account you'll need. But it is an essential part of short- and long-term financial planning. A savings account is an easy way to start accumulating some financial reserves. You won't earn much interest, but the money is readily available in case of a financial crisis. And it's safer than your mattress.
When selecting your savings account, check the minimum balance and monthly fees. Paying large monthly fees is the opposite of saving money.

Checking accounts
Your checking account will be your workhorse. This is where you'll deposit any money you receive. You will typically be able to write checks, withdraw money from an ATM and use a debit card and have these transactions deducted from your account balance.

Keep a record of all your transactions so that you know exactly how much money you have in your account. Banks can charge as much as $30 and sometimes even more if you bounce a check.

You will receive a monthly statement that lists all of your transactions as well as your ending balance. Make sure your monthly statement matches your own list of transactions. You may catch mistakes that you made in recording your spending, or even a bank mistake. Click here for a detailed description of how to read your bank statement and reconcile your checking account.

ATM
You'll find an Automated Teller Machine nearly everywhere there are people. They offer access to cash from your bank account at any time. But this easy access can be dangerous. Record all of your withdrawals or you could find yourself broke before you can say "ATM."

If the ATM belongs to your bank, your ATM withdrawal will usually be free. But if the ATM belongs to another bank, you'll be charged anywhere from $1 to $3 per transaction. If you find yourself being charged frequently, try to anticipate your spending and take out enough cash to cover all your expenses at one time. Or better yet, plan a weekly trip to your bank's own ATM to withdraw the money you will need for the week.

Debit cards
A debit card offers the convenience of using a credit card while allowing you to spend only what you have in your account. It's a great way to avoid racking up credit card debt. But, like your ATM transactions, record these transactions and be sure you have the money available in your account before you make a purchase.

Keep in mind that a debit card IS NOT a credit card. If you spend more than you have in your account, it's the same as bouncing a check. And since you are only spending what you have and are not using credit, a debit card will not help you build a credit history.

Credit unions
A credit union is owned and controlled by the people who use its services. So if you use a credit union, you are a part owner of it and will be treated to lower than average service fees and minimum account balances.

Not everyone can join a credit union, however. Credit unions are formed by members with a common bond. For example, some credit unions are formed by students attending a particular university. If you happen to be attending that university, you are eligible to join that credit union.

Don't immediately join any credit union you are eligible for. While most are quality financial institutions, some are not and may not have the organization and efficiency to offer good customer service and favorable interest rates. Do some comparative research into interest rates, fees and customer service ratings before you join a credit union.

Banking online
It seems that the Internet can be used for everything these days - including banking. If you have convenient Internet access, online banks can be an easy way to manage your finances. You can check your transactions and balances online as well as pay bills - all without even having to get dressed. The downside to online banks is the lack of personal customer service. If you find a traditional bank in your area that also offers online banking, you've got the best of both worlds. Just be aware of extra fees a bank may charge to let you complete transactions online.