Financial accounts that everyone needs

21 Jan Financial accounts that everyone needs

It doesn’t matter if you have a few hundred or millions in your bank accounts.  There are different kinds of accounts everyone needs to better manage their finances and set up for success down the road.  Different accounts is key to ensure your cash is safe, gives you the ability to pay bills and invest and plan for long term saving goals or even retirement.  Each account has an unique purpose and I believe all of the accounts mentioned below has a place in someone’s portfolio.  I personally have acquired them in the order from basic to advanced over the years and was thankful for all of them.  Full disclosure, I do not have annuity account.

1)  Basic accounts:

Checking Account

Average checking account are used for writing checks or set up payments online.  It is the account that most of your money transactions should be associated with.  Bonus if you sign up with a Credit Union since they generally provide free checking / saving accounts and charge less fees in general.  If convenience is important then a commercial bank with wide selection of ATMs worldwide might be a suitable candidate.

Saving Account

This is where you keep your hard earned cash.  It is important that you try to keep this account growing and almost pay yourself first by establishing good saving habits.  This account is usually FDIC insured for $250,000.

Credit Card Account

I would recommend getting a credit card early rather than later.  It is good to build your credit history and there are many credit card reward programs that would make your money go further.  However, it is also tempting to spend the money you don’t have with credit card and many have fallen behind on their financial goals because of it.  It would be crucial that one pays off the balance every month so they are never charged with high interest rate that usually comes with credit card.  Note: there are also other benefits that come with having a credit card such as, travel insurance, rental insurance, price matching… refer to each credit card offer specifically and ALWAYS read the fine prints 😊

2)  Advanced accounts:

Emergency Saving Account

This should be a high yield account that contains money that is only used for emergency.  It should be a fairly liquid account meaning you can withdraw the money from it with relative ease and without much delay.  I am a strong believer that emergency account should cover 6 months of your expenses and should be only used as a LAST resort.

Retirement Account

There are many types of retirement accounts.  This warrants another post and I will link it here in the future, so stay tuned for that.  In general these accounts are used for building wealth for your income during retirement (after 59.5).

Brokerage Account

These accounts are either online only or with a traditional financial institution where you generally keep money that you want to invest/trade with.  They should not be the money that you will potentially need within 2 years.  I use these to plan for mid to long term financial goals such as down payment on a house or car etc.  Due to the nature of stock market one would generally see ups and downs in they brokerage account, knowing that it is normal and don’t let your emotions get the best of you while investing with this account is critical to your long term financial success.  This type of accounts are generally linked with your checking/saving account to facilitate ease of money transfer.

*Life insurance Account / Annuity

I am least familiar with these type of accounts.  They work as insurance for various purposes and are complex to setup as well as to maintain.  Really do your homework if you are interested in them and talk to professionals to make the best decision based on your own circumstances.

Thanks for reading thus far do you have your own favorite financial accounts that are not listed here?  I’d love to hear what they are.