As you get older and are in need of more financial services, it can be a bit intimidating, especially when you realize just how many types of accounts there are. Thankfully, many experts agree that there are a few accounts everybody should consider holding to keep your money organized, set you up for the future and even help grow your wealth.
You’ve already opened a checking account, congrats! Maybe you opened it just so it was easier to buy things without going to your parents all the time, or maybe you needed it as you headed off to college. No matter the reason, you know it’s a valuable resource.
Everybody has monthly expenses, and there are numerous reasons why separating the money you expect to spend from the rest of your funds can be advantageous. To start, it helps you keep better track of how much of your income is devoted to expenses — both vital and recreational. A checking account also gives you a centralized place from which to draw funds for everything from rent to car repairs to subscription services.
By compartmentalizing your so-called “spending money” from the rest of your finances, you can see which behaviors will benefit you in the long run and which will hurt.
Any money that you don’t need to apply directly to rent, utilities or any other expenses should be placed in a savings account. The idea is that a portion of whatever income doesn’t go to your checking account goes directly to savings. Eric Rosenberg of Business Insider says that the separation of savings from spending money can stop you from being tempted to spend frivolously. As a bonus, you can use saved funds as a way to accrue even more wealth thanks to interest rates.
Emergencies tend to pop up when we’re least prepared for them. As such, it’s a good idea to put some of your money aside for unexpected incidents. If this account is separate from your central accounts, you’ll know exactly how much you can afford to spend for vehicle repairs, home maintenance and health issues without pulling funds — and potential income — away from the place in which they grow in value.
Mic.com’s Christy Rakoczy encourages you to keep this money in an account that’s easy to access – like a separate checking account. It puts up a barrier between this fund and your spending money, but still makes it available when desperately needed.
Retirement may seem like a vague idea that’s so far into the future you don’t have to think about it right now. You may not have started your first job, or if you have, chances are you’re not contributing to a retirement plan yet.
Rather than discussing this in depth, just know that when you’re ready, there are numerous ways to put your money away. One of the most popular ways is a 401(k), which many companies set up for their employees to contribute to, and sometimes they match those contributions as well. Another common way is an Individual Retirement Arrangement (IRA), which you can open at the bank and start contributing to up to a certain limit each year.
Overall, it’s never too early to start preparing for your retirement. In fact, the sooner you start saving for your later years, the better. So when you’re ready to start saving for retirement, talk to a financial advisor to determine what options are best for you.
Ultimately, the financial accounts you choose depend on your needs and personal situation. For more information, contact one of our friendly personal bankers.