Money Management

When you graduate, your student account could be converted by your bank or you could decide to move your money elsewhere. Learn more here. 

Student checking accounts can be a really attractive option for college students. These accounts usually come with fewer fees and requirements than traditional accounts. But they don’t last forever. Once you graduate, you may lose access to the account you were using while still in school.

So, what exactly should you do about your student checking account? Here are some of your options.

Allow the account to switch to a different one at the same bank

Many banks will automatically convert your student checking account into another type of account the financial institution offers. Simply switching to the new account that the bank opens up for you can be a convenient and easy option since you don’t actually have to do anything if you take this approach.

However, it’s important to understand how the new account differs from the student account that you had before. You may find that there are additional fees you were not charged on your student account, such as a new monthly maintenance fee. Or you may now have a new minimum daily balance requirement that you have to fulfill in order to avoid being charged a monthly fee.

If the new account doesn’t come with a lot of additional charges and you are generally happy with the bank and want to stick with it, there’s no harm in doing so. That’s especially true if the bank is convenient to where you live, if you have multiple accounts with the bank you want to keep, if you love the banking app and are used to using it, or if you’ve received great customer service.

Shop around for a new checking account

Although you can stick with your existing bank, it is worth shopping around to see if a different financial institution may have more to offer you now that you are no longer a student.

A new bank may provide an account that charges low or no fees, which could be a better option if you’d be stuck paying for your account with your existing financial institution. Or it may offer other special perks you want to take advantage of, such as free checks or reimbursement for ATM fees.

If you want to keep your checking account and savings account with the same bank, a different financial institution may offer you a better interest rate than your current one does. This could be reason enough to switch — although there’s nothing wrong with having a checking and savings account with different banks if you’d prefer to take that approach.

Ultimately, while you may decide to just accept the new account your bank switches you to once you are no longer a student, you should take the time to see what else is out there. There’s a wealth of options for adults who want a checking account offering great benefits, so don’t settle for the status quo until you’ve explored your choices.

It takes a little time to shop around to find the right bank, but since your checking account is going to be central to your financial life for years to come, it’s worth the effort.

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Are you making enough contributions to your 401(k)? Find out the average contribution rate and how you compare. 

When it comes to retirement savings, 401(k) plans are an essential component for most Americans. 401(k) plans allow workers to save a portion of their pre-tax income and invest that money to grow over time. However, determining how much to contribute can be daunting, especially in times of economic uncertainty. Fortunately, according to Vanguard’s annual “How America Saves” report, Americans continued to save a record amount last year.

Workers continue to save at record rates

The report found that despite the economic uncertainties, the average worker last year was able to contribute an impressive average of 7.4% of their pay to their 401(k) accounts last year, matching the record set in 2021. The median contribution rate was 6.4%.

When taking into account both employee and employer contributions, the average total participant contribution rate in 2022 was 11.3%, with a median rate of 10.6%. These rates have remained relatively consistent for the past five years.

While the contribution rate is at record highs, how much a worker can save depends on factors such as age, income, and job tenure.

Contribution by age

According to the latest data, individuals under the age of 25 who contribute to their 401(k) plans average a contribution rate of 5.2%, the lowest of all age groups. The contribution rate continues to rise as workers age, with those 65 and older contributing 9.0%, the highest of all age groups.

Contributors who are older tend to have more work experience, higher salaries, and less debt. Since they typically have a larger disposable income, they can contribute larger amounts to their 401(k)s. Additionally, there is the option to make catch-up contributions, which is an added benefit for those who are older, and allows them to put away potentially thousands of dollars more annually.

Average employee 401(k) contribution rate: 7.4%

Contribution by income

Workers with an income of less than $15,000 contribute an average of 5.5%, while those in the $100,000-$149,999 income range contribute an average of 9.2%, the highest of all groups. The amount drops to 8% for those making $150,000 or more. This could be due to the fact there is a maximum contribution limit for retirement accounts. Interestingly, it’s the $15,000-$29,000 income group that contributes the lowest amount, at 4.7%.

Those in higher income brackets tend to contribute more than those with lower incomes, since they typically have more disposable income and can afford to save more.

Contribution by job tenure (years)

Workers with longer tenure at a job often contribute more to their 401(k) plans than their counterparts with shorter tenure. As workers gain more experience and earn higher salaries, they can often afford to contribute more to their plans.

Furthermore, workers who have been with a company for a long time are more likely to be in higher-level positions, which come with higher salaries and better benefits. All of these factors can combine to put workers with longer tenure in a better position to build up their retirement savings.

Workers still aren’t saving enough

The Vanguard report reveals that despite the impressive numbers in 401(k) participation and employee contribution rates, workers are still not saving enough for retirement.

To ensure a comfortable retirement, Vanguard recommends that participants save a minimum of 12% to 15% of their pay. However, the average total contribution rate is currently at 11.3%, slightly below the recommended amount.

How to save more for retirement

Saving enough for retirement means starting early, setting clear goals, and being disciplined about putting away a portion of each paycheck. One of the first steps toward saving more is to create a budget and find ways to reduce unnecessary expenses.

You might consider delaying your retirement or even continuing to work part time to accrue extra income. It’s worth exploring your investment options, and consider opening an account besides an employer-sponsored 401(k), such as a Roth IRA. Regardless of the approach, saving for retirement requires discipline and planning, but the long-term benefits are undoubtedly worth the effort.

Even though workers with lower incomes and less job tenure have less opportunity to save for their retirement, it’s important to remember that any amount saved towards a 401(k) can make a difference in the long run. Investing in a retirement account should be a priority for everyone. All employees should regularly review their retirement savings plans and make necessary adjustments to ensure a secure financial future.

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A short sale could hurt your credit, but it may become necessary. Read on to learn more. 

There may come a point when you start struggling to keep up with your mortgage payments. Missing a single payment might hurt your credit score, but it typically won’t result in foreclosure. Rather, you generally have to skip multiple payments in a row for your lender to consider foreclosing on your home.

Now, if you can’t keep paying your mortgage, the easiest thing to do from a financial standpoint may be to just sell your home. It may not be ideal, but if you owe $220,000 on your mortgage and your home could sell for $250,000, you’ll be able to walk away from that situation largely financially unscathed.

But what if your home can’t sell for a high enough price to pay off your mortgage? In that case, you may want to ask your lender to agree to a short sale. Doing so could get you out of a tough situation without risking foreclosure. But you should know that a short sale could have implications from a credit score perspective.

How a short sale works

In a short sale, your home is sold for a price that’s lower than your mortgage balance, and your lender eats the difference. So if you owe $220,000 on your mortgage and your home sells for $200,000, your lender takes a $20,000 loss.

Why might a lender agree to a short sale? It’s simple. The foreclosure process can be complicated and costly for lenders. A short sale might help them recoup most of what they’re owed, and that might read like a better option than running the risk of foreclosure.

Will a short sale impact your credit score?

A foreclosure could have a major impact on your credit score — and not a good one. But it generally won’t have nearly the same negative impact as an actual foreclosure.

Now, the extent to which a short sale drives your credit score down will depend on different factors, including your payment history and how high or low your score is to begin with. The damage will also hinge on whether you missed mortgage payments prior to that short sale or not.

Any time you have a late payment on your credit report, whether it’s a mortgage payment or a credit card payment, your credit score has the potential to drop — and quite a lot. So there’s really no single rule of thumb when it comes to how much exactly a short sale will cost you in terms of your credit score.

However, Experian says a short sale could remain on your credit report for up to seven years. That’s not quite ideal.

Keep in mind that a short sale isn’t the same black mark as a foreclosure. You will generally need to wait at least two years following a short sale to apply for a mortgage again. But chances are, if you reached the point of needing a short sale, it’s probably best to wait a while before committing to another mortgage anyway.

Also, if you reached the point where you couldn’t pay your mortgage, it may be that you were late on other bills, too, resulting in credit score damage. So it’s generally best to wait a while to get a large loan like a mortgage in that sort of situation. That way, you can work on rebuilding your credit to qualify for a more attractive borrowing rate in the future.

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A medical credit card could benefit you if you have a large bill you can’t pay in full. Read on to learn more. 

Many people rack up large medical bills and don’t manage to pay them in full on the spot. In fact, the Kaiser Family Foundation reports that almost 1 in 10 Americans has medical debt.

When you’re staring at a medical bill you don’t have enough savings to cover, you may have no choice but to find a way to pay it off over time. And that’s where a medical credit card could come in handy.

Unlike regular credit cards, which allow you to pay for a wide range of purchases, medical credit cards are only used to pay specific medical bills. Using one of these cards to pay off a balance over time could be a smart move, but there are pitfalls you should try to avoid.

How to open a medical credit card

Many healthcare offices will assist you in signing up for a medical credit card when there’s a bill or procedure you can’t pay for outright. It’s similar to how medical offices will commonly put you on a payment plan where you’re handing over a portion of your balance month after month rather than in one fell swoop. Only medical credit cards can actually benefit doctors’ offices.

The reason? With a medical credit card, you get approved for a line of credit that’s equal to the sum you owe. The credit card company then pays your provider in full so it gets the money, and you then pay your balance over time to the issuer of your card.

There are pros and cons to consider

The benefit of opening a medical credit card is that interest on these cards is often deferred for a period. This means that if you’re able to pay off your medical bill quickly, you might avoid racking up interest on it.

However, if you don’t pay your balance off in short order, you do risk racking up interest, and that could make your debt more expensive. You also risk having your credit score sustain damage if you fall behind on your payments (though recent changes to credit reporting have made it so that delinquent medical debts under $500 won’t appear on a credit report, and that settled delinquent debts are wiped from credit reports immediately).

If you’re looking to get a medical credit card to satisfy an existing debt, compare that option to a payment plan through your provider. See what interest rate each will charge, to get a sense of which is a better fit for your finances.

Also, before you open a medical credit card, see if you have funds you can use to pay off a larger healthcare bill. You may have money in your flexible spending account or health savings account you forget about that might allow you to at least make headway on that bill.

You also shouldn’t hesitate to try to negotiate with your provider if you’re staring at a huge bill that’s apt to be a burden to pay off based on your income. In some cases, your doctor’s office might be willing to settle your balance for less than its full amount if paying off the full amount over time will really be a hardship for you.

Finally, people often get stuck with medical bills due to their insurance providers denying their claims. Before you resign yourself to having to pay, make sure your claim wasn’t denied erroneously. Something like a billing code error could be enough to result in a denied claim, leaving you on the hook for money you should not actually be liable for paying.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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