Student Banking
Nobody can ever achieve wealth by spending more than you earn.. That’s the bottom line. To begin accumulating wealth, one needs to make money work as hard as it can for one. The wisest method in doing this is to store your money where it will earn the best return. Most checking accounts don’t pay interest. The money left there to pay bills is not earning a thing. Almost all banks offer a money-market sort of account that earns interest. It’s a good thing to keep most of the available cash in a money-market account at the bank, and when it’s time to pay the bills, you can transfer the funds from the money-market student bank account into the checking account.
Back up Funds for Emergencies
Emergency reserve funds or additional cash saved should be invested in the student bank account that pays the most interest. When you really think about it, money-market accounts often require at least $1000, it pays around 3 – 6 percent and that depends on where the interest rates are.
With inflation at 3 percent, you’re at a break-even stage. Your cash, as well as buying power, will increase about as quickly at 3 percent, you’re at a break-even stage. Your cash, as well as buying power, will increase about as quickly as swollen cost of services and goods. If your primary student bank account, the money-market account, is paying 4 percent, while the inflation remains at 3 percent, then basically, you’re earning a real return of 1 percent.
1 percent is better than Zilch any day. Although it isn’t close to a decent return, that cash can actually be placed into the stock market, in a stock mutual fund that’s returned 20 percent per year for the last ten years. Of a matter of fact, a 20 percent return is outstanding. Even if the return was 10 percent, that’s not half bad. For this reason especially, many financial experts suggest putting money into the stock market. However, the stock market is a long-term investment, with funds you won’t need for the next five to ten years.
Funds you will need in the next two years, makes them volatile; therefore, a short term CD or money-market primary student bank account at a stock brokerage company may not be a bad idea. Funds actually return 5 to 6 percent and the funds are liquid assets. At the bank, the checking secondary student bank account can be used for petty cash withdrawals. The primary student bank account can be reserved to save money and earn interest. The way, the checking secondary student bank account won’t interfere with your interest-bearing liquid assets.
When you compare interest rates on your funds at different financial institutions, it’s a good idea to look at the annual percentage rate (APR) as a comparison point. The APR takes into consideration a standard amount of interest and fees, as it calculates the total return on the investment. Now, that’s a wise way to do student banking.