Setting up banking for a new college student

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aaasdaef
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Setting up banking for a new college student

Post by aaasdaef »

My son is turning 18 and starting college. I would appreciate some feedback on what I've been planning so far.

While he was still a minor, I set him up with a Fidelity Youth Account rather than a banking account for minors which seemed rather inconvenient and had very low interest rates. So currently he has some of his savings sitting in SPAXX (Government Money Market) and it's linked to my Fidelity account. Certainly as a kid I saw no reason to have him deal with the weirdness of having both Checking and Savings and having to move money around.

When he turns 18, his account will become a general Fidelity brokerage account. I wonder if he should open up bank accounts now, or whether this account is sufficient for his banking needs. It has a debit card linked to it and supports check deposit, bill payment, venmo/paypal, although sadly not Zelle. It pays better than just about any savings account (and is almost as safe), and he won't have to remember to move money from savings to checking, etc. I can have him get a credit card from Fidelity too, so he can have it all in one place.

In terms of cash flow, I expect we will set him up with a monthly allowance and probably pay college bills directly, so he will just spend money on day-to-day activities of a college student.

How does that sound to you? Am I missing something he will really want to have a bank account for?
HereToLearn
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Re: Setting up banking for a new college student

Post by HereToLearn »

My children did not have bank accounts in their college towns and never needed them. Almost no use for cash. Even poker was settled via Venmo.
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StevieG72
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Re: Setting up banking for a new college student

Post by StevieG72 »

Sounds like you have everything covered.

My daughter is an authorized user on my credit card, has her own debit card, & has a spend card her mom set up for her. She typically rotates between dad’s cc and mom’s spend card with precision so she will stay under the radar. We are divorced so she has some anonymity on her expenditures.
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NateH
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Re: Setting up banking for a new college student

Post by NateH »

Might be a good time for him to practice responsible use of his own credit card, and build his credit score?
Teens today have zero need for cash, so a local branch is worth next to nothing.

Some schools have partnerships with a bank where their student ID gets linked to the account and their swipes and taps at the book store and dining areas automatically draw like a debit card. That convenience would seem to be the only reason to open an account that I can think of. USBank covers a number of states.
4X top-twenty S&P 500 prognosticator. I'd start a newsletter, but it would only have one issue per year. | dumb investor during 1999 tech bubble, current slice & dicer.
Topic Author
aaasdaef
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Re: Setting up banking for a new college student

Post by aaasdaef »

Yes, I expect he should get his own credit card and practice paying his own bills. We will just transfer $X into his "savings" every month, and the rest is for him to juggle. He is also an authorized user on my credit card account, but I would expect him to stop using it except in emergencies.
HereToLearn
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Re: Setting up banking for a new college student

Post by HereToLearn »

aaasdaef wrote: Wed Jun 07, 2023 9:36 pm Yes, I expect he should get his own credit card and practice paying his own bills. We will just transfer $X into his "savings" every month, and the rest is for him to juggle. He is also an authorized user on my credit card account, but I would expect him to stop using it except in emergencies.
I had my children set up their CC on autopay for the full balance on the due day, or perhaps shortly before the due date. I don't actually know the specifics since they set it up themselves. The reason I suggested autopay was because I was afraid they would forget to pay and then incur a late fee. They do not use debit cards so everything flows through on one CC.

They each had one of my CC through college for 'approved' purchases: books & anything academic-related, transportation home, medical, etc. They used their own cards for social expenses.
aristotelian
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Re: Setting up banking for a new college student

Post by aristotelian »

My 13 and 16 year olds also have Fidelity Youth Accounts. Great choice for their teen years.

I believe the Fidelity brokerage account does not reimburse ATM fees, so if they use the debit card they should switch to Fidelity's Cash Management Account. It works very similarly to the brokerage account except that you are not allowed to choose a money market fund as the core account. Instead, the default (and only) core account is the FDIC insured sweep account (currently yielding about 2%).

If they want their core account to be a money market fund, they could use a Cash Management Account along with a Brokerage account. The CMA would be used as a checking account with debit/ATM card, with their emergency fund and investments in the brokerage account.

Have you decided what to do for a credit card?
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Jimbo Moneybags
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Re: Setting up banking for a new college student

Post by Jimbo Moneybags »

When he turns 18, it should be his decision whether or not to have a bank account (checking or savings). He should wait until then to open any new account rather than needing you to open it now as a custodial account and it later becoming his own account on his 18th birthday.
CHXRAVEN
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Re: Setting up banking for a new college student

Post by CHXRAVEN »

Consider back up accounts for both bank and credit cards. Recently had an instance where a bank froze my DS college student's only bank account due to suspected fraud. He was told by the bank it would likely take 7 to 10 business days to resolve. I helped him get it unfrozen in two days but that was a wakeup call to get extra accounts in place. For our college student children we provided them with joint bank accounts from our primary bank, making it easy to transfer funds with a few clicks. Also made them authorized users for our primary credit card(s). And yeah, the college kids love Venmo and Zelle.
DrChronzworth
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Re: Setting up banking for a new college student

Post by DrChronzworth »

Once upon a time in the dark ages when I went off to college my parents gave me a check and told me to figure out how I’d like to handle my money and I went to set up a bank account.

If your child is smart enough to go to university I’m sure he’s smart enough to figure out what they need for handling their money - if they want a bank account they should be able to do that themselves. If Fidelity is good for their needs they can make that decision.
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tyrion
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Re: Setting up banking for a new college student

Post by tyrion »

aristotelian wrote: Thu Jun 08, 2023 1:00 pm My 13 and 16 year olds also have Fidelity Youth Accounts. Great choice for their teen years.

I believe the Fidelity brokerage account does not reimburse ATM fees, so if they use the debit card they should switch to Fidelity's Cash Management Account. It works very similarly to the brokerage account except that you are not allowed to choose a money market fund as the core account. Instead, the default (and only) core account is the FDIC insured sweep account (currently yielding about 2%).

If they want their core account to be a money market fund, they could use a Cash Management Account along with a Brokerage account. The CMA would be used as a checking account with debit/ATM card, with their emergency fund and investments in the brokerage account.

Have you decided what to do for a credit card?
Good note on the CMA account.

My kid recently turned 18 and his Fidelity Youth account transitioned to a brokerage account. He also set up a Cash Management Account so he can have real checks which will work with the college e-check system so he can pay tuition etc. A lot of places don't like the long account numbers Fidelity uses for the brokerage accounts. I didn't know about the ATM reimbursement and to be honest the next time he uses his card at an ATM will also be his first time using it at an ATM. He does use the debit card function a lot.

Also a Fidelity Roth IRA and a credit card at ... Discover. I think. He tried for a more mainstream Visa/MC but was denied due to credit history. I should have added him as an authorized user on my account earlier.
bloom2708
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Re: Setting up banking for a new college student

Post by bloom2708 »

Each of our 3 kids has a checking account and a savings account along side our checking and savings account at the local brick & mortar bank that refunds all ATM fees and has no other fees.

I can "see" the accounts and I can transfer money to them. They each have a debit card.

The oldest has one year of grad school left. Then I will take myself off her checking account. I took myself off her savings account recently. Hers to manage.

Oldest has a credit card. Middle is at the point to apply for a low limit credit card. 3rd kid is a sophomore and high school and won't need a CC for a few years.

These local bank accounts are not for earning interest. It seems many banks have no interest or need in paying market or 50% of market rates. The two oldest have a Vanguard account with a taxable account and a Roth IRA. They use the Fed MM as a HYS. They know how to transfer back and forth.

Do whatever works. Once they launch, detach and let them fly solo.
Last edited by bloom2708 on Thu Jun 08, 2023 2:51 pm, edited 3 times in total.
aristotelian
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Re: Setting up banking for a new college student

Post by aristotelian »

DrChronzworth wrote: Thu Jun 08, 2023 1:25 pm Once upon a time in the dark ages when I went off to college my parents gave me a check and told me to figure out how I’d like to handle my money and I went to set up a bank account.

If your child is smart enough to go to university I’m sure he’s smart enough to figure out what they need for handling their money - if they want a bank account they should be able to do that themselves. If Fidelity is good for their needs they can make that decision.
Many people graduate high school with little or no financial literacy, and predatory companies will do everything they can to take advantage of them. I will certainly do what I can to steer my kids toward good choices. I don't know why you would withhold knowledge from them if you have knowledge that will help them.
DrChronzworth
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Re: Setting up banking for a new college student

Post by DrChronzworth »

aristotelian wrote: Thu Jun 08, 2023 2:13 pm

Many people graduate high school with little or no financial literacy, and predatory companies will do everything they can to take advantage of them. I will certainly do what I can to steer my kids toward good choices. I don't know why you would withhold knowledge from them if you have knowledge that will help them.
Most people don’t have parents who are Bogleheads or have Fidelity cash management accounts set up by said parents - if they find the cash management account is insufficient for their needs I don’t see how they will get taken advantage of by opening a checking account at a bank. Surely a simple “hey if you want open an account don’t let the bank sell you other products” should suffice.

If an 18 year old doesn’t have the intellectual capacity to open a bank account then how are they going to handle the other challenges of living by themselves during university?
aristotelian
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Re: Setting up banking for a new college student

Post by aristotelian »

DrChronzworth wrote: Thu Jun 08, 2023 2:37 pm
aristotelian wrote: Thu Jun 08, 2023 2:13 pm

Many people graduate high school with little or no financial literacy, and predatory companies will do everything they can to take advantage of them. I will certainly do what I can to steer my kids toward good choices. I don't know why you would withhold knowledge from them if you have knowledge that will help them.
Most people don’t have parents who are Bogleheads or have Fidelity cash management accounts set up by said parents - if they find the cash management account is insufficient for their needs I don’t see how they will get taken advantage of by opening a checking account at a bank. Surely a simple “hey if you want open an account don’t let the bank sell you other products” should suffice.

If an 18 year old doesn’t have the intellectual capacity to open a bank account then how are they going to handle the other challenges of living by themselves during university?
OP did not say anything about opening the accounts for the kid. In fact the post specifically asks what accounts the child should open. (At 18, I'm not sure it's even possible for the parent to do it for them).
aaasdaef wrote: Wed Jun 07, 2023 9:02 pmI wonder if he should open up bank accounts now, or whether this account is sufficient for his banking needs...
DarthSage
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Re: Setting up banking for a new college student

Post by DarthSage »

When my DDs turned 18, I took them to the bank to get a credit card and a checking/debit account. Oldest is long since launched--she and I still have a joint credit card for when I'll pay for stuff for her--like flights home.

DD20 has a low-limit credit card. I believe she pays off any amount owed, as soon as she has enough in her debit account. She doesn't use it much, doesn't tell me, and I've never asked. She rarely gets a bill for it. She's also an authorized user on my Target Mastercard. This is supposed to be for emergencies, but she also pays for things like doctors' co-pays and the like with it. If she uses it IN Target, she asks me first. I get cash back on that card, which I give her.

All my kids do most of their banking using their phones and debit cards. The ones who get cash tips have me cash them out, then deposit the larger bills in an ATM.

Having your college student as an authorized user on your card allows them access to a larger credit line, and you can see their purchases. We did this, in addition to their own smaller card, in case they needed a plane ticket home or had major car repairs or something.
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Kagord
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Re: Setting up banking for a new college student

Post by Kagord »

DrChronzworth wrote: Thu Jun 08, 2023 2:37 pm Most people don’t have parents who are Bogleheads or have Fidelity cash management accounts set up by said parents...
LoL, my kids were manually sweeping funds from cash to money markets/treasury bill auctions regularly on Schwab at 18 on accounts they set up, to minimize the paltry low interest cash brokerage accounts pay. Basic treasury functions are an important life lesson best learned early, instead of panicking, potentially, later in life, during some venture capital focused bank having a liquidity event.
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VictorStarr
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Re: Setting up banking for a new college student

Post by VictorStarr »

aristotelian wrote: Thu Jun 08, 2023 1:00 pm My 13 and 16 year olds also have Fidelity Youth Accounts. Great choice for their teen years.

I believe the Fidelity brokerage account does not reimburse ATM fees, so if they use the debit card they should switch to Fidelity's Cash Management Account. It works very similarly to the brokerage account except that you are not allowed to choose a money market fund as the core account. Instead, the default (and only) core account is the FDIC insured sweep account (currently yielding about 2%).

If they want their core account to be a money market fund, they could use a Cash Management Account along with a Brokerage account. The CMA would be used as a checking account with debit/ATM card, with their emergency fund and investments in the brokerage account.

Have you decided what to do for a credit card?
There is no need to switch to CMA, Fidelity reimburses ATM fees for the former Youth Account owners:
https://www.fidelity.com/cash-management/atm-debit-card
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VictorStarr
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Re: Setting up banking for a new college student

Post by VictorStarr »

aaasdaef wrote: Wed Jun 07, 2023 9:02 pm My son is turning 18 and starting college. I would appreciate some feedback on what I've been planning so far.

While he was still a minor, I set him up with a Fidelity Youth Account rather than a banking account for minors which seemed rather inconvenient and had very low interest rates. So currently he has some of his savings sitting in SPAXX (Government Money Market) and it's linked to my Fidelity account. Certainly as a kid I saw no reason to have him deal with the weirdness of having both Checking and Savings and having to move money around.

When he turns 18, his account will become a general Fidelity brokerage account. I wonder if he should open up bank accounts now, or whether this account is sufficient for his banking needs. It has a debit card linked to it and supports check deposit, bill payment, venmo/paypal, although sadly not Zelle. It pays better than just about any savings account (and is almost as safe), and he won't have to remember to move money from savings to checking, etc. I can have him get a credit card from Fidelity too, so he can have it all in one place.

In terms of cash flow, I expect we will set him up with a monthly allowance and probably pay college bills directly, so he will just spend money on day-to-day activities of a college student.

How does that sound to you? Am I missing something he will really want to have a bank account for?
Yes, it is a very good setup for college students. My youngest daughter has used Fidelity CMA for all her banking for the last three years and been very happy with it due to having everything in one place and unlimited ATM fee reimbursements. In addition to a CMA account she has Roth IRA and Fidelity brokerage used for savings and investments.

Your son will soon have a Fidelity brokerage account, there is no need to open an additional CMA account, the brokerage account has the same functionality.

BTW, you need to fill and submit a form to do fund transfers to third-party Fidelity accounts. As an alternative, you may use BillPay for money transfer between Fidelity accounts.
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