J.D. Moneysaver, Contributor
There are a myriad of ways to save your money. Using a savings account is the most common and basic method, and also the method a student is most likely to utilize.
Savings accounts are designed for exactly that – saving your money. They come with no monthly fees and the bank will not charge you to make deposits, but the usage fees for taking your money out can be very high. You will only get one to three free withdrawals a month (and may very well get zero), and the charges go from $1-5 per withdrawal. The purpose of these fees is not to milk you (or at the very least, it’s not just that). What they do is force you into thinking about when, why and how much of your money you are taking out of your savings for use on other things.
Look at a savings account as an electronically sealed piggy bank: if you want the money, you have to break the cute glass piggy with a hammer; likewise, if you want to keep taking money away from your savings account, you better have a good reason for it.
Savings accounts also pay interest on your balance. However, the interests rates paid out are very low, something in the range of 1-2% a year and paid out monthly. For the average non-billionaire, the only way to make money from your interest is through other investment products (stocks, bonds, GICs and such). Whole books have been written about these investment vehicles because they can be very complicated, not to mention risky. There are a host of resources online and in print, or you could simply ask your banker if you’d like more details on those options.
One last tip that could truly change the way you think about saving: In my time at the bank, I often see young people with a few hundred dollars set aside in savings accounts with simultaneously large credit card balances they carry over month to month (and thus getting charged interest). This is not a good way to save. Every month you carry over a credit card balance you pay interest on it, which is usually 20% per year. You shouldn’t let money sit around doing nothing when you have credit card debts racking up big interest every month. Save when you can afford it, but pay your credit card bills first.