When leaving for university, students are often overwhelmed with the amount of financial advice they receive. Student loans, books, tuition, residence - the list goes on. However, most students are never informed about one of the best ways they can save their money: where they decide to keep it.

Many banks offer student accounts, but not all accounts are equal. With the advent of on-line banking, students now have a far greater choice of banks and account types than ever before, and spending a few minutes informing yourself on your options now could earn you several hundred dollars during your time as a university student.

Below, information is cited from several different banks. Efforts will be made to keep this information up to date, however it is strongly recommended that you verify the exact details of each banking plan before making a final decision.

"Traditional" Student Banking

First, lets consider the "traditional" student accounts offered by the big banks. The student accounts from TD Canada Trust and CIBC will be used as examples.

TD Canada Trust Student Account

• offers a 50% discount on its Self Serve Account to students. With this account,
• students pay 3.45$ a month in service charges if they keep less than 1,500$ in their account.
• students receive 20 self-serve transactions a month, which includes Interac Direct payment purchaces, Green Machine withdrawals, and telephone banking bill payments.
• interest rate: 0.05% (Date)
  See www.tdcanadatrust.com for details.

CIBC Student Account

• also offers a 50% discount on its fees for student accounts
  
• students pay 1.95$ a month in service charges if they keep less than 1000$ in their account and make 0-10 transactions a month.
  
• additional transactions cost 30¢ each.
  
• interest rate: 0.10% (Date)
  See www.cibc.com for details.

Essentially, you are earning practically no interest on the money you are saving, while at the same time being forced to pay several dollars a month in service fees and possibly transaction fees if you surpass the allotted number of transactions per month.

Alternative Banking Options

Several students have found these two "traditional" accounts and those offered by the other big banks to be less than ideal, and have therefore sought an alternative. They found it in some of the newer financial institutions, two of which are examined now.

ING Direct Invesment Savings Account

• although ING does not offer a special account for students, its Investment Savings Account is still an ideal way to "save your money"
  
• no monthly service fees, no minimum balance
  
• unlimited phone and internet transactions
  
• 4 free Interac transactions a month, additional transactions 75c each, unlimited transactions at ING's bank machines.
  
• interest rate: 2.50%
  See www.ingdirect.ca for more details

PCFinancial Interest First Savings Account

• PCFinancial does not offer a special student account either, but the First Savings Account is still an excellent choice for students
• no minimum deposit
  
• no service fees
  
• unlimited transactions at CIBC and President's choice bank machines
  
• Note: you can't make immmediate withdrawals from a bank machine or make Interac Direct Payments with this account
  
• interest rate: 2.15%
  See www.pcfinancial.com for details

Clearly, the potential for savings and (dare I say) earning money by using these alternative banking solutions are tremendous, provided you are willing to shop around a little.

The Benefits of the Alternative Banking Options

The best way to motivate yourself to investigate alternative banking solutions is to see just how much money it can save you. Consider how much money you would earn in interest by investing 2000$ in each of the different bank accounts for one year, without making any transactions. (These are rough numbers, ignoring interest made on interest)

Figure 1: At this rate, CIBC will make someone rich, but it certainly won't be us students. Consider keeping your savings in an account that pays higher interest rates than your traditional bank.

Based on these figures, ING and PCFinancial are the way to go, earning 43x and 50x more than TD, and 21x and 25x more than the CIBC account. Of course, these earnings do not include the transaction fees and service charges you would incur for making certain numbers of transactions or failing to maintain a minimum balance if you're not fortunate enough to have 2000$ lying around. However, when these factors are considered, the gap between the new internet banks and the old "big" banks is likely to increase.

Don't forget that you can mix and match your banking accounts, so if you find features in two banking accounts that you like, calculate the costs associated with having them both, and decide if opening two accounts is the the most economically viable decision. This way, you can get all the features you want from your bank account, while making several hundred dollars to offset your other expenses.

The UniversityAdvice.com Editors' Bottom Line

For students earning a 10$ an hour, an investment of a half hour to apply for a new bank account is equivalent to working 4.5 hours less in the next year, or of paying for half a new textbook. Based on my personal experience, I have found ING Direct to be ideal for my most of my banking needs, while paying one of the highest interest rates in the business. Of course, it is up to each student to determine what his personal banking needs are and to take a few minutes browsing each bank's website to see what kind of plans they offer. Find the plan that maximizes your money and allows you to complete transactions as conveniently as possible, and you'll soon find looking at your account statements to be a much more pleasant experience.

Enjoy saving!

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