Get a high-yield online savings account and put some money in it.

Real short and sweet, huh? Well, that’s the point, because it’s fairly simple. You already know you should be trying to save, so we’ll skip the lecture on that, and just go straight into the where.

You see, the problem with savings accounts at regular, “brick-and-mortar” banks is that their interest rates tend to suck. As I write this, Bankrate puts the national average at an abysmal 0.46%. That means for every $100 you put in a regular savings account, you get 46 cents per year.

Rates at any bank aren’t particularly high right now, thank to recent economic happenings, but you can certainly do better than 0.46% by going online – 2.75% or higher. You can check out current rates by visiting the sites that offer high-yield savings accounts:

• Capital One 360
• E*TRADE
• Citibank
• Emigrant Direct

There are others – leave a comment if you want to add your favorite! All of these accounts have something in common, though: no minimum and no fees. That’s something you might have trouble getting from a brick-and-mortar bank, as well.

My personal favorite? Capital One 360. I have four online savings accounts (the other three being at E*TRADE, Citibank, and Emigrant), and Capital One 360 has given me the best experience. They don’t always have the highest rate, but their interface and customer service are top-notch. And you can’t beat their referral program!

Truly Frequently Asked Questions About Online Savings Accounts:

Are they safe?
Yeah. These are real banks and real accounts, and the accounts are FDIC insured, just like your accounts at brick-and-mortar banks.

Why is the rate so much higher than regular savings accounts?
Brick-and-mortar type banks have to employ tellers, security people, rent the property, build the building… there’s a lot more overheard to running actual locations. Online banks can set up just one or two office buildings for the whole country. Their lower costs add up to bigger rewards for you.

How do I get money in and out of them?
These accounts electronically link up to your current checking account. The process is easy, and you’ll be walked through it when you open the account. Once they’re linked up, you can do transfers between the savings account and your checking account. Warning: Federal law prevents you from making more than 6 transfers per month out of any savings account. This includes non-online accounts! You can make as many transfers in as you like, however.

I’m a big, big fan of Randy Pausch. He was a Carnegie Mellon professor who rocked the world with his Last Lecture, just about one year ago. He passed away this July, which is what brought him to my attention. Even though I’ve watched the Last Lecture (and read the same-named book that he published before he died), I actually prefer his Time Management lecture.

Now, this tip isn’t about time management, although that’s not a bad financial tip. The more productive you can be, the more you’ll earn and keep your money. But I don’t need to tell you that – you already know that. No, the nugget that I want to highlight from Randy’s time management lecture is this:

Planning is very important. One of the time management cliches is ‘Failing to plan is planning to fail.’ And planning has to be done at multiple levels. I have a plan every morning when I wake up, and I say ‘What do I need to get done today, what do I need to get done this week, what do I need to get done each semester?’ That’s sorta the time quanta cause I’m an academic. And that doesn’t mean you’re locked into it!

People say, ‘Yeah, but, things are so fluid – you know, I’m going to have to change the plan!’ And I’m like ‘Yes! You are gonna have to change the plan. But you can’t change it unless you have it.’"

Make a Plan

Any plan. Any plan at all. Take out a piece of paper and draw your ideal life 5 years from now, 10 years from now, 20, 30, 40. Make a list. Do it in Photoshop. But don’t do it on a whiteboard or carve it into a stone tablet – the plan will change, but you want it to be semi-permanent enough to reference.

Come up with some goals for yourself. They don’t have to be financial goals. In fact, they shouldn’t be. This isn’t a time for numbers – it’s a time for dreams. "I want to get married on a tropical island in 10 years." "I want to own my own home." "I want to swim with dolphins." "I want to be able to retire comfortably when I’m old."

Your dreams are the most important thing. Get them down on paper, and each day, make sure you’re working toward them. If you’re doing something that doesn’t get you closer to one of your dreams, then why are you doing it?

Now, though, it’s time for a hard truth.

Dreams Cost Money

The average wedding: $28,000
Owning a home: Depends. Let’s just call it, "A mortgage and a down payment of at least 20%."
Swimming with dolphins: I confess, I don’t even know. Several thousand, at least, or a career in marine biology.
Retiring comfortably 40 years from now: $2,000,000+

It’s important to, once you have a dream, figure out how much it costs. Just like you should focus your time on your dreams, you also need to focus your money. Just because you’re in college doesn’t mean you’re off the hook. A dollar you make now is no different than a dollar you make when you’ve graduated. Except for one big difference:

A dollar today has a bigger advantage in compound interest.

Assign a dollar amount to each one of your goals. If you can’t figure it out, ask someone what they think. Once you have a dollar amount, you can figure out how much you need to save each month to get there. If it’s far off, you have the advantage of compound interest.

To get $2,000,000 40 years from now, you need to save $7,720.32 per year (assuming 8% interest compounded annually, which is pretty average for the stock market). To get a $28,000 wedding 10 years from now, you need $2,442.45 per year (getting 3% in a high-yield savings account).

Likely, the numbers will seem too high for you while you’re still in college. But think like Randy – you can always change the plan later, and you’ll probably have to! If nothing else, this will give you a ratio for what you should be saving. If I want the retirement and the wedding, I should save $2.44 for the wedding for every $7.72 I save for retirement.

So make a plan. Run the numbers. Sock away what money you can. Because these are your dreams we’re talking about here. Just like your time – if you’re not spending your money on your dreams, what are you spending it on?

This tip is so simple and so dumb. Not dumb as in "you’re dumb if you do it," but dumb as in "Seriously? Why is this even a tip?" But don’t run away yet, because I stand by this fact: this is the most important and most helpful tip I could possibly share in this series.

That seems kinda silly, doesn’t it? Releasing the best tip right off the bat! Shouldn’t I save the good stuff for later, to keep you reading? Ha! Come on guys, I’m not that crafty. I’m way more concerned about you guys getting a running start, right now. So here we go.

Track What You Spend.

That’s it. That’s the secret. It’s hugely simple, and hugely effective. And everything else builds on top of it. Maybe it’s that old "knowledge is power" thing. Actually, it’s probably more like this:

For anything else to work, you need to know where the %@$# your money is going.

Too lazy? Bah! No one in the world is lazier than me, except maybe LazyMan, and even he seems to use Wesabe to track his spending. Which brings me to my next point – there are a ton of tools to make this task easier:

Old fashioned, dirt cheap: Small memo pad from the dollar store, and a pencil. Keep these two things in your purse or pocket, and every time you spend money, write down what you bought, where you bought it (maybe), and how much it cost.

*Bonus tip* I highly suggest that if you don’t use pencil and paper (I don’t), you at least keep a piece of paper in your wallet for tracking cash purchases that you don’t get a reciept for. If you’re anything like me, cash is incredibly hard to keep track of, even when you didn’t mean to be carrying much in the first place!

Free, more high tech: An Excel spreadsheet on your computer. This is what I use, so that I can track how much I make right alongside it. You don’t have to know how to use the math functions in Excel to do this – you can just use the little boxes (cells) as handy columns for the what, where, and how much.

Other computer programs work as well. Notepad, Word, whatever the Mac equivalent of Notepad is… you could even use a Paint program if it gets you to do it. I don’t care, just as long as it’s easy for you to read.

Also free, even more high tech: There are a lot of online sites that will pull the information from your bank accounts and credit cards, and analyze your spending for you. This is good if A) you trust the site and B) you rely on plastic forms of payment much more than cash.

Some examples of this: Wesabe, Mint, and Yodlee. Actually, most of these type of sites use the Yodlee system to do this – Bank of America’s "My Portfolio" feature is just Yodlee dressed up in Bank-of-America-red. To use Yodlee directly, click "Yodlee MoneyCenter login" on the upper right of their page.

I can vouch for the three sites listed above, because I’m a user. Your information will be safe thanks to their privacy policies. However, these tools aren’t completely perfect – you will have to keep an eye on them. Since they automatically sort and categorize your purchases, you might run into some weird blips. Like once, I had a textbook purchase show up in the "Health and Beauty" category. But most of these services are smart enough to "learn" after you correct them once.

The Power of Tracking

Not sold on tracking your spending? How about a story.

There was once a girl so broke and bad with money, she had to drop out of college and face the real world. But, when she dropped out of college, she also started tracking her spending. Over just nine months, she was able to go back to school. One year after that, her credit card was paid off, while she was still in school. Two months after that, she had $1600 in savings.

If you’ve read any other part of this blog, you’ll know that girl is me. It all started with tracking my spending. It’s the crux of all I was able to do.

You won’t have to do it forever. And you can automate it, now or later, using online tools. But you simply have to have some way to tell if you’re making progress. This is where it all begins.

We’ll get into how to use this information later. The important part is that you start immediately, if you aren’t already doing this. Start with the next thing you buy, or the next bill you pay. It won’t kill you.

As college students, we don’t manage our money because…

• We think we don’t have any
• We don’t know where to start
• We don’t think it’s important
• We think it’s too hard
• We’re kinda lazy – I mean, it will work itself out, right?

Sounds like the exact same reasons we put off doing assignments for class. And we all know how well procrastination pays off there. It’s the same for money – put it off, and it’ll bite you right in the ass.

The only one of those that might actually be an excuse is “I don’t have any money.” But for most college students, I don’t believe that for a second. In 2004, 78% of undergraduates worked while they were enrolled, according to a brief by the American Council on Education [PDF]. Thanks to current economic uncertainty, I’m willing to bet that percentage is higher right now.

So, at least 78% of us have a job of some sort – which means there’s money coming in, even if it goes right back out again. But thanks to that aforementioned economic uncertainty, we have to shape up. No one else is going to take the reins of your financial future – you have to do it yourself.

How to Become Financially Savvy While Carrying a Full Class Load

Ok, I’m done pressing the doom and gloom. If you’ve made it this far, you’re ready to ask me, “How, Stephanie, do I take the reins of my financial future or whatever?”

To answer that, I bring you a new weekly series on PTY. Every Friday, a quick tip you can use to bring yourself closer to financial freedom. Carrying out these tricks shouldn’t take you more than 15 minutes a week, but it will have a profound impact on the rest of your financial life.

The series so far:

1. Where It All Begins
2. Planning For Your Dreams
3. Bank Better
4. Check Your Credit Report
5. Get Your (Free) Credit Score
6. Do Your Own Taxes
7. Do Your Own FAFSA
8. Know What You Owe
9. Establish Credit
10. Cut Up Your Credit Card
11. Save Your Tax Refund
12. Free Stuff, Part I
13. Free Stuff, Part II
14. Upromise
15. Get Savings
16. Incoming Freshmen
17. Rent Some Textbooks
18. Open a Retirement Account

Are you older, wiser, or already financially savvy? Share your tips and financial hacks in the comments. Show us whippersnappers how it’s done!

When I got my ducks in a row and decided to head back to school, I did the math, and figured that I could really only go back to school if I commuted from home. Otherwise, I wouldn’t be able to afford it. But those calculations were really just guesses – I had no idea whether it would really save me money or not.

More than one year later, the question is: was I right?

The Costs of Commuting

Even though I saved money on rent by living with my parents, I incurred the extra cost of commuting 16 miles to campus. This includes the cost of gas, the nearly $800 in repairs that my car needed during the school year, insurance, and little things like oil changes, inspections, and new windshield wipers. I did manage to keep the cost somewhat low by crashing on friends’ couches now and then.

Car costs and miscellaneous from living at home: $2,177 for the 2007-2008 school year.

The Costs of Living On Campus

If I’d lived on campus, I would have probably lived in same apartment there that I’d been living in, in 2006. The rent for that apartment was $3,060 for the 2007-2008 school year.

So already, rent vs. cost of commuting, I’ve saved money. But it keeps going.

Food! I guesstimated groceries at $120 per month, based on what I was spending when I lived in the apartment before. That’s another $960 for the school year.

And, even if I’d lived on campus, I still would have had my car. I have no way of knowing whether or not my car would have still needed all those repairs if I’d lived on campus, so I included them as a cost as well. I assumed about $25 a month in gas – I didn’t drive much when I was living on campus, but I did go to the grocery store and such. Car costs add $1,692 to the cost for the year.

Total costs for living in an on-campus apartment: $5,712 for the 2007-2008 school year.

Total Savings

$3,535

Case closed – I was right in the first place. Commuting saved me a boatload. In fact, the saving are even better than that: that extra $3,535 would have come from student loans, so I would have had to pay interest on that, as well.

One final note: although commuting can save a lot of money, I don’t necessarily recommend it for incoming freshman. Living on campus, on your own, is an experience that you can’t really put a price on, even with all this math. I moved back home because I absolutely had to.

If you can’t afford to live on campus, I would recommend picking a cheaper school before I would recommend moving home. That, unfortunately, was not an option for me.