Why Young Entrepreneurs Need to Open a Savings Account
Saving money for the future may seem like a thing only adults worry about. They’re closer to retirement, have more bills to pay, and have more life events to plan. Your parents may have taken care of your college savings plan themselves, leaving you free to focus on school and friends.
But saving money isn’t just for major life events, retirement, and college. And saving goes beyond a piggy bank or debit card filled by your parents. Here’s why you should consider a savings account right now – and how to get started.
THE SOONER YOU START, THE MORE MONEY YOU HAVE
Savings accounts usually offer something called an interest rate. That’s a percentage that the bank puts into your account for free. FREE MONEY.
The longer that money sits in your savings account, the more interest you earn. Pretty soon, you’ll earn compound interest – interest on your interest! All you have to do is make a deposit and let it sit. Even better, keep adding money to your savings. Once that entrepreneurial profit starts to roll in, put a percentage (say, 10%) into your savings. Then watch those dollars grow! After a year or two, you’ll have more money than you started with. Who doesn’t want that?
YOU’LL HAVE SPENDING MONEY IN COLLEGE
As a high-achieving young entrepreneur, we know you’re goal-oriented on getting into the best college possible. That’s why saving money now is so important. On top of tuition, dining plans, books, and dorms, you’ll want some cash on hand for your own needs. What if you and your roommate decide to host a party? What if you want to eat off campus one night? What about clothes, makeup, shoes? Having your own money, separate from Mom and Dad, guarantees you more freedom at school.
SAVING NOW DEVELOPS GOOD ENTREPRENEURIAL HABITS FOR LIFE
You know this. We know you know. Being a successful young entrepreneur means learning and developing good habits. And one of those habits is managing your money wisely. And managing your money wisely includes – you guessed it – learning how to save.
Saving is more than not spending. It means being wise about finding the right savings account for you (more below), adding to that account whenever and as much as you can, and possibly setting a goal for that money once you reach a certain amount.
This is good practice for being an entrepreneur. Being serious about your savings account will teach you patience, goal-setting, how interest rates work, and how to bank like an adult.
YOUR MONEY IS YOUR MONEY
Not borrowing from Mom and Dad. Not asking a sibling to spot you some cash. Your savings account is YOURS. While a parent or guardian will probably have to co-sign your account to open it, that money is still YOURS. And having your own money, answerable to no one else, is pretty sweet.
HOW TO OPEN A SAVINGS ACCOUNT
Savings accounts are separate from checking accounts or credit cards. And nearly every bank has a savings account option. How to choose the one that’s right for you?
Start your search by looking for savings accounts designed especially for kids and teens. Many banks offer this option, so look around and get ready to do some comparison shopping.
Because banks know that kids and teens generally don’t have a lot of their own money, most offer zero-minimum balances to open the account. This means you don’t need a single penny to start a savings accout.
Look for a zero-minimum maintenance balance. Some accounts require you to keep a certain amount of money in the account to avoid being charged fees. (Yes, it’s counter-intuitive to charge more money for accounts that have less money in them.) Finding a savings account with a zero-minimum maintenance means you’ll never have to worry whether your balance is too low.
You’ll want an account with what’s called a “high APY.” That stands for annual percentage yield. In normal-people speak, that means higher interest rates per year, aka MORE FREE MONEY.
Watch out for fees! Banks can get sneaky with those. When comparing savings plans, look for terms like “management fees,” “transfer feeds,” and “service fees.” Fees are what the bank takes for themselves in exchange for protecting your money.
The easiest way to shop for your best savings account options is to use a website that does the work for you. These sites list accounts by minimum balance, APY, and fees:
Your parents might suggest you open an account at whatever bank they use for their checking or credit cards. That’s because they already know this bank, have an online login, and it’s easier for them to go with a known quantity. While this is probably the easiest way to get started, it might not be your best option. Check some of the links listed above and impress your parents with your knowledge of which banks have the best APYs and lowest minimums. (Who knows, they might even use your findings to move their own accounts!)
One last thing to consider when saving money: CDs. Not the music discs from the 1990s. In banking, CD stands for certificate of deposit. This is like a savings account that you can’t withdraw from (without being penalized) for a certain amount of time. The longer you set your CD term, the higher your interest rate and the more free money you earn. CD terms range from 3 months to 5 years or more. Consider putting your money into a CD if you:
- Know you won’t need that money for a while
- Are worried you’ll be too tempted to withdraw your savings too often
- Want a higher interest rate
As with regular savings accounts, check out the terms and rates for CDs at different banks before you commit.
One of the key qualities of a successful young entrepreneur is responsibility. And nothing proves that you are a responsible young adult more than successfully managing your money.
If you are a high school student in Florida with a passion for entrepreneurship, click here to find out more about the Kantner Foundation’s college scholarship program.