February 25 through March 2 is America Saves Week which was created to promote better savings behavior so that individuals can get themselves into stronger financial shape. Getting all your different financial accounts in order is an important step in putting your savings strategy onto the right track. Part of that effort is having the correct financial accounts to help you handle your finances. Many people only have one or two financial accounts that they use for all of their financial needs. This could be enough depending on their circumstances, or if could be far fewer than they really need to better handle their money. Below are listed ten different financial accounts that most people should consider having to meet their financial needs.
Checking Account for Bills
If you want to stay on top of your finances, there are a couple of accounts you should sign up for to keep everything in order. One of the first financial accounts people sign up for is a checking account. However, many people only have one checking account that they use to pay bills, for daily spending, and as their impromptu emergency fund. Instead of lumping everything into one account, create one separate account for your paycheck, bills, and other monthly expenses.
Checking Account for Daily Spending
A second checking account dedicated solely to daily expenses is also a good idea. As many people have discovered, separating your monthly expenses from your daily expenses creates a lot less hassle in your life. For instance, after you’ve set aside enough money in your checking account for monthly bills, you know that you can use the rest of the money in your daily spending checking account.
Short Term Savings Account
A short-term savings account is another type of financial account you should have. A short-term savings account allows you to put aside money for smaller expenses. If you’re in school, you might want to put money aside each week or each paycheck to help you pay for books. If you’re planning a vacation, you might use your short-term savings account to help you save the amount you want to spend on your trip.
Long Term Savings Account
Alternatively, a long-term savings account is the type of savings account you shouldn’t touch. If you need money, pull it from your short-term savings account. A long-term savings account should be the type of savings account that you pretend doesn’t exist. Set up an account at a separate bank from your normal institution and set aside a certain amount to be directly deposited into that account. This will make it easier to save over a long period of time which will hopefully give you a nice portion of money to use later down the road for some big event or purchase.
While an emergency fund sounds similar to a long-term savings account, the latter is the type of financial account that shouldn’t be touched until years down the road. An emergency fund is the type of savings or checking account that has a solid balance and is used to fund sudden and unexpected crises. A regular savings account is usually money you want to spend on a specific item, but an emergency account is money you need to spend to cover items such as unexpected repairs on your house or unexpected medical bills. This is one of the first accounts that should be funded and if you don’t have one, a 52 week savings challenge is a great way to begin.
Retirement accounts are also another important type of financial account. If your employer offers a 401k, even if it’s without a matching contribution, you should sign up for one. This allows you to save pre-taxed money for retirement (though you will be taxed once you remove the money). Or you can put your money into a Roth IRA which is post-tax money that won’t be taxed when removed. There are various types of retirement accounts and regardless of which type you choose, it’s important to have a financial account that will provide you with some income during retirement.
If you have children that you intend on sending to college, you should sign up for a 529 plan. A 529 plan is a tax-advantaged investment intended for higher education savings. Some plans allow for the money in the plan to be excluded from financial aid determiners while some might match grant or scholarship amounts. A 529 plan is a good way to start saving early for college.
Credit Card Account
There are a lot of people who refuse to have a credit card because they believe it will encourage them to spend money frivolously. But a credit card is good to have for a variety of reasons, especially if you’re the type of person who only buys what you know you can pay off. Credit cards tend to have better warranty and customer protection programs than normal bank accounts or debit cards. Additionally, using and paying off a credit card each month is a great way to build or improve your financial credit which can save you a lot of money when borrowing money for a home or car.
Do you own your own business? Or maybe you sometimes use your own money for business expenses and are reimbursed at a later date by your company. Maybe you have a freelance job that you like to keep separate from your regular job. If any of these apply, you might consider signing up for a business account so you can not only keep track of business expenses, but so you can keep your business and personal finances separate.
If you’re interested in not only saving money, but accruing money, consider opening an investment account. You may have to hire a broker to deal with trading, buying, and selling stocks, bonds, and mutual funds, but it’s a good way to start building up your equity and assets, especially when bank savings accounts pay so little in interest.
(Photo courtesy of .jo.hardell.)