Why Every Student Should Have a High-Yield Savings Account
What do you do with your loan money when you get it? Does it just sit in your checking account doing nothing until you spend it? That’s what mine did when I got it, but now I’m older and wiser. Here’s what I should have done.
I should have put my loan money into a high-yield savings account. It would have earned interest instead of just sitting in a checking account doing nothing. In my case, the interest I would have earned from a high-yield savings account could have covered most of the interest accruing on my student loans.
Of course, this will vary from case to case based on a number of factors:
- Are your loans subsidized or unsubsidized?
- What’s the interest rate on your loans?
- What’s the APY of the high-yield savings account?
In my case, I have $15,000 in subsidized loans and $5,000 in unsubsidized loans. Since my student loans are a few years old, I was able to consolidate them at a 3.0% interest rate. That’s lower than the APY of almost every high-yield savings account available. If I had put my loan money into a high-yield savings account, I would have been able to pay off the interest on my $5,000 unsubsidized loan without doing any extra work. Even though interest rates are higher on student loans now, you can still cover a good portion of any interest accruing on your loans by keeping your money in a high-yield savings account.
Students Without Loans
If you don’t have loans, you should still put your money in a high-yield savings account. If you don’t, you’re basically giving away free money. After getting a graduate assistantship, I no longer have to rely on student loans, but I have been putting my monthly stipend into a high-yield savings account. In fact, I put almost all of my income in my high-yield savings account and only move it to my checking account when I need to pay bills. After doing this for the past year and half, I’ve earned enough in interest to pay off the interest accruing on my $5,000 unsubsidized loan.
As I’ve mentioned before, I have an Orange Savings Account at ING Direct which currently has a 4.20% APY. Other high-yield savings accounts have a higher APY, but ING makes up for it with a great referral program. If you open an account with $250 or more with a referral from me, then YOU GET $25, and I only get $10. That’s right, you actually get more out of it than I do. If you’d like a referral or have any questions, let me know.
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[...] traditional savings accounts that have ridiculously low interest rates, so get with the times and open a high-yield savings account. Move your savings into one of these and say goodbye to outrageous monthly service fees [...]
[...] a simple way to make $25 in only a few minutes. Previously, I’ve written about why every college student should have a high-yield savings account and the benefits of opening a separate account. By opening a high-yield savings account at ING [...]
[...] previously written about why every student should have a high-interest bank account, it should come as no surprise that I opened one of these a few years ago. While the interest rates [...]
Does your referral program with the $25 go for every account opened or just one account under the same person? I would open 10 plus Orange accounts if each of them paid me a $25 referral fee. Let me know.
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