I don’t know about you, but I didn’t know ANYTHING about bank accounts growing up. I didn’t know what accounts I had in my name, where my babysitting or birthday money went after I handed it to my parents, I literally had no clue what I had or where I had it.
Because honestly, bank accounts are boring and overwhelming. I didn’t know which accounts I actually needed, or what they even do. So today I’m breaking it all down for you and keeping it super simple with the only 3 accounts you need.
A checking account is probably what you think of when someone says “bank account”. It’s where your paychecks get deposited into, where your venmo transfer ends up, and likely where your parents stored all the money you gave to them. It’s also where your bills get paid from, and where you spend your money from. It’s basically your “action account”, both where you deposit and withdraw money from all the time.
So you definitely need a checking account where you can keep track of your money. It’s a good idea to have all your paychecks automatically deposited into your checking account, and pay your rent and credit card bills from it too. You can also link a debit card to your checking account, which will let you spend money you already have (sitting in the account) instead of spending a credit card company’s money and risking debt.
Keep in mind, you do not want your money sitting in your checking account forever and ever. If you’re not going to need money for at least 6 months, transfer it over to your brokerage account to let you invest.
If you want to start investing, and cmon, you want to start investing, you need a brokerage account. It’s just the account that holds your investments, whether that’s stocks, bonds, or other security.
So if you want to invest in Amazon for example, you would set up a brokerage account (using this link:), transfer cash into it from your checking account, and then buy a share of amazon with that cash!
The cool thing about a brokerage account is that you don’t NEED to have every dollar in your account invested. If you are saving up for something and will need your money within the next year or so, you can keep the money in “cash”, or uninvested, in your account and basically use it like a savings account.
Okay, I saved the best for last!! Obvs. The third account you need in your life is a Roth IRA, which is basically a retirement account. It’s like a brokerage account because it holds investments, but the idea is that the investments are meant to finance your retirement.
But let’s be real – retirement is far away so why are we talking about it now? Why do we care about a Roth IRA? Basically the government wants to motivate you to be super responsible and start saving up for your retirement, so they give you a sick deal – tax free gains.
That means that you take money you have earned on the books (that means no cash, venmo or zelle!!) and pay taxes on it. Then you put it in your Roth IRA and leave it there until you’re 59 ½. By the time you take it out, it will have (hopefully) grown many many times over into a lot more money and you don’t need to pay a dollar of taxes on it! Not a dollar.
This is insanely awesome, especially because if you start investing in your Roth IRA young, it can grow to hundreds of thousands (maybe even millions!!) of dollars and you won’t pay a dollar of tax on any of that money.
You need to take advantage of a Roth IRA account ASAP, but before you do it’s important that you know that there are a few rules and regulations that you need to be prepared for when it comes to this magical account. Click here (link to new article) to learn what those are.
So what are you waiting for? Go open these 3 accounts!! As always let us know if you open any accounts and how you’re liking them! We’re here for any questions or if you just need help opening up these accounts!