ôô

7 Financial Accounts You Need for a Richer Life

A key to growing rich is having the right financial accounts in place. Get the scoop on seven accounts that most individuals and families should have for more financial success.

By
Laura Adams, MBA ,
July 4, 2018
Episode #551

Having a healthy financial life means that you manage money wisely in the present and are also prepared for the future. A key to making that happen is having the right financial accounts in place.

The best accounts are tools that make success inevitable because they allow you to make more, save more, and create safety nets. In this post, I’ll review seven accounts that most individuals and families should have to stay organized, pay for unexpected expenses, fund long-term goals, and build wealth.

7 Financial Accounts You Need for a Richer Life

  1. Checking account 
  2. Credit card account 
  3. Savings account 
  4. Retirement account 
  5. Brokerage account 
  6. Health savings account 
  7. 529 savings account

Here’s what you need to know about each of these accounts:

1. Checking account

While having a checking account might seem basic, according to an FDIC survey, 7% of American homes, or 9 million households, don’t have one.

Carrying and keeping large amounts of cash just isn’t safe. If it’s stolen, lost, or destroyed in a natural disaster, you can’t get it back. Instead, everyone should use a checking account with a bank or credit union.

Think of your checking account as the Grand Central Station for your cash flow. All your sources of income go in and all your expenses and allocations go out. If you have a spouse or partner, you might have additional checking accounts so each of you can spend a certain amount any way you like.

Use an institution that offers many free services—such as online banking, online bill pay, and unlimited transfers—so you streamline money management. You can link up your checking to personal finance software or apps like Quicken, Mint, or Personal Capital to easily track your spending and stick to a budget. Otherwise, you’re stuck with a manual system that can be difficult and time-consuming.

A podcast listener named K.G. says, “Per your advice, I have $15,000 for emergencies stashed away in my checking account, but it only earns a few cents in interest a month! I’ve seen a few banks offer large bonuses if you open an account, deposit new money, and satisfy a few other conditions. Is there any downside to opening these accounts, grabbing the free promo cash, and then closing the account once the conditions are met?”

Thanks for sending in your question, K.G. Using a reward checking account is a great way to make your money work harder for you. Many pay an annual percentage rate as high as 2% to 3% on all or a portion of your balance when you meet qualifications.

For instance, you may be required to make a minimum number of debit card purchases each month, have at least one direct deposit, and sign up for digital statements. These allow the bank to save or earn money so they can pay out higher interest rates to customers. If you don’t meet the requirements, you still earn interest, but at a much lower rate. Other than the hassle of switching banks, there’s no downside to taking advantage of rewards checking promotions. 

2. Credit card account

Most Americans have an average of two to four credit cards, depending on whether you include those who have no cards. I have 6 personal cards and one business card, spread across all the major brands: Visa, MasterCard, Discover, and American Express.

I get cash back rewards on my American Express, but it isn’t accepted at some places or in some countries. I have an Amazon Prime Visa that gives me 5% back on all purchases at Amazon.com.

If you travel overseas or make purchases from merchants outside of the US, you should have a card that doesn’t charge foreign transaction fees. So, consider how different cards can help you achieve your financial goals, like saving money on different types of purchases you make regularly.

Your online purchases should only be made with a credit card—never use a debit card. A cybercriminal can use your debit card information to instantly drain your bank account. But if your credit card is compromised, the most you’d have to pay is $50.

There’s no limit to the number of cards you can or should have. But I recommend having at least two, so you have a backup if something goes wrong with one of them. And to have as many as you feel comfortable managing and will benefit your financial life.

See also: 7 Micro Habits That Create Financial Success

Pages

The Quick and Dirty Tips Privacy Notice has been updated to explain how we use cookies, which you accept by continuing to use this website. To withdraw your consent, see Your Choices.