The Big Bucks: How to Manage Money Now That You're On Your Own

By Elizabeth Patton

Every year approximately 460,000 people under the age of 35 years old declare bankruptcy. In the last decade, loan debt has risen 142% for college students.1

The Big Bucks will explain in clear, conversational language the basics of money management-from credit cards to checking accounts to leases on cars. This is the info students need to know as they head off to college.

It's the perfect graduation gift for any student in your church or school!

• Language: English
• Publisher: Thomas Nelson
• Release date: Apr 1, 2003
• ISBN: 9781418540999

Book preview

CHAPTER ONE

THE BUCK STARTS HERE

With money in your pocket,

you are wise and handsome and you sing well too.

YIDDISH PROVERB

SO YOU’RE DONE WITH HIGH SCHOOL, and it’s time to get ready for college. You’ve gotten the necessities: your bed linens, a new backpack, a roommate, just to name a few. You’ve been to orientation and back. You’re registered for your first semester of classes. All that’s left on the To Do list is getting the checking account.

This new step of independence means no more asking Mom or Dad for money as you run out the door to catch a movie with your friends. Or maybe that’s not how it worked in your family. Maybe you started a checking account early on in high school and kept a job to keep the account full. If so, then this chapter may be repeating some things you already know. But perhaps it will provide you with a fresh perspective on the ins and outs of checking accounts. And it will help you to understand where many of your peers are coming from.

Now, where were we? Oh yeah, the part about your parents not being able to hang around your dorm lobby to hand out cash at your whim. No, you are going to be responsible for making sure you have what you need. Does this mean stashing away your life savings in every nook and cranny of your dorm room, so that, while keeping it safe, you’re always guaranteed to find money somewhere? Let’s see, where can I find some cash? Oh yeah, there’s a five-dollar bill taped to page 103 of my biology book! Hopefully, this will not be the case. So what should you do with your money to keep it safe and make sure it’s easily accessible? Well, I’m glad you asked. It just so happens that this chapter focuses on that very question. So read on. . . .

CHOOSING A BANK

It’s time to take a field trip to the bank. Why? Because (1) your money will be easily accessible there and (2) your money will be much safer there than, yes, even in your biology book. I know, who in their right mind would think to look there? But let’s use some common sense here. Banks exist so that you don’t have to nervously stash everything away. So decide which bank you want to do business with. If you’re going to attend school in a different city than your hometown, make sure to choose a bank that you can have access to in both places. Many out-of-town students go back and forth enough between home and their college town that it just makes things easier if they can access their accounts from either place.

This bank stuff is going to take some research on your part if you want to get the best service. One thing you should take into consideration as you’re deciding whom to bank with is the various fees that you will sometimes be charged. For example, a bank might charge a small fee for writing over X number of checks a month. Your best bet then would be to determine how often you’ll be writing checks versus using a check card. If you hardly ever write checks, then that fee won’t really apply to you. However, if you think you’ll often push the limit, then it would probably be better to find another bank that lets you write as many checks as you want, without penalties.

A bank might have a fee for something else instead, such as not maintaining the minimum balance required. The minimum balance is the smallest amount of money you have in your account at one time. Banks want you to keep a certain amount of money in your account because they need it to carry on their business. They won’t hesitate to charge you if you don’t abide by their standards. Another way banks zap you with fees is through ATMs, which we’ll talk about a little bit later.

Every human being likes to assert his or her opinion, so a good step to take would be to solicit the advice of your family and friends who already have checking accounts. They most likely have been doing business with various banks for quite some time and would have helpful thoughts on which ones provide the best service. Also, many banks have special student checking accounts, which are worth looking into as they are geared toward the financial lifestyle of a college student. Often, these types of accounts have no monthly service fee; banks know the typical college student is not Mr. or Ms. Moneybags. The more informed you are, the better you will be at asking questions and the more discernment you’ll have in choosing a bank that best suits your needs.

OPENING THE ACCOUNT

First things first:You’ve got to have money to start a checking account, so remember that as you go to set one up. You can’t start something with nothing! Find out the minimum amount of money required to open the account before heading to the bank you’ve chosen. Remember to ask what sort of monthly service fee that particular bank charges, if any. Go ahead and familiarize yourself with the things commonly associated with checking accounts: deposit slips, check cards, checks, bank statements, etc. (See the list of financial definitions at the back of this book.) The following are a few of the banking basics.

THE CHECKBOOK

Upon opening your account, you will receive your own book of checks, complete with your name and address. A check, according to Merriam-Webster’s Collegiate Dictionary, is a written order directing a bank to pay money as instructed. Okay, so I’m sure you know what a check is—I mean, c’mon, it’s the twenty-first century! But do you know why people first began using them? Think about what life would be like today if there were no checking system: Every time anyone needed money, they would have to go to their bank and personally withdraw the funds. Considering the average number of purchases made in a single day, the typical American might as well pitch a tent in the bank parking lot!

Checks are especially

convenient when it

comes to paying bills

or simply paying on the

spot when you don’t

have cash or a check card

or credit card on you.

Someone a long time ago foresaw this inconvenience and came up with a quicker method. Checks began as, and still are, promissory notes from you to the payee. A check gives the person you paid permission to take money from your bank. The bank then reimburses itself by taking money from your checking account. Without the checking system, our world would be much more complicated. Either you would be making numerous trips to the bank or you would be forced to carry around a fat wad of cash, making you a nervous wreck and a prime target for pick pockets. Thank goodness, we don’t have to operate that way!

Obviously, you have to know how a checkbook works to use it correctly. There are three parts to a checkbook: the register, the checks, and the deposit slips. Let’s see how each of these works:

#1. Register. The register at the front of the checkbook is for recording all of your transactions. In other words, every time you write a check to someone, deposit money into your account, or withdraw from your account, you need to write it down in the register. In addition to writing down all of your transactions, you need to be balancing your checkbook. This just means subtracting whatever you spend from your total amount and adding to it when you make a deposit.

Your total amount of money in the account is called the balance. The balance is the total principal (your money) plus any earned interest (what the bank pays you—we’ll go into more detail later). Keeping up with your balance is extremely important because, in doing so, you not only track the funds available to you, but you practice good habits for the future, when you will (hopefully!) be dealing with larger sums of money.

#2. Checks. The checks themselves are fairly easy to use. You are required to write down the amount of the check twice—once numerically and once in words. This is a security precaution to ensure that the amount does not get tampered with or verify a person’s illegible writing. You’ll want to make sure that your writing is clear so that there is no mistaking the amount to be taken from your account. And write with a pen, not a pencil, which goes without saying. That way no one can erase what you write and replace it with a larger amount.

If, for some reason, you should make a mistake while writing the check, such as making it out to the wrong person or writing in the wrong amount, then write VOID in big letters across the face of the check. This means that the check is no longer usable. You also may want to rip up the check as an extra precaution.

Once your check has been processed, the bank will add it to your record of monthly transactions known as a bank statement. When a check is unaccounted for—that is, when the recipient of the check has not yet cashed it—it is known as a floating check. Even though it has not yet been processed, you still must subtract it from your balance because it will eventually go through, and you want to make