That’s the subject of my last column for the CMC Forum; enough people asked me about it and I see enough people throwing away money that I felt it could have a big impact.

Here’s my recommendation for banking:

The current best interest rate for a savings account is 1.14%, which means that if you have $1000 in a savings account for a year, you’re only going to make $11.40 in interest. So it’s not really that important right now to pick a bank because of its high interest rate.

A smarter move is to pick a bank that minimizes fees. There are two main sources of fees – ATM withdrawal fees and overdraft fees (when you try to withdraw more money than you actually have in the account). Fortunately, there are some banks that are not evil. I recommend Ally Bank, a new online bank. You can withdraw your money from any ATM and Ally will refund the fee. Also, you can sign up for overdraft protection, which will transfer in money from your savings account (with no fee) if you overdraft in your checking.

And on investing:

The best evidence we have says that, Warren Buffett aside, it’s extremely rare for anyone to beat the return of the stock market over a long period of time. Of course, people can beat it in the short run, just like if you had 1,024 people flip a coin ten times in a row, you would expect two of them to have all heads or all tails. However, there’s an easy way to perform at least as well as the overall stock market – invest in index funds, which allow you to own shares in thousands of companies for the price of one share (this is how all of my money is invested).

I also talk about credit cards and Roth IRA’s. A section on student loans would have been nice – my advice would be “don’t take them” – but I never took student loans so I could realize other people might be in a different position. 401K’s, rent/buy and how to finance a car are important topics but not so much for college students.

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