Laura reviews essential accounts for managing and growing money, regardless of age or stage of life.
Laura reviews essential accounts for managing and growing money, regardless of age or stage of life.
Money Girl is hosted by Laura Adams. A transcript is available at Simplecast.
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Having the right financial accounts is critical for staying organized, achieving goals, and building wealth. They lay a foundation for your financial life and should work seamlessly together. If you have all your money in just one or two accounts, that's a sure sign you're missing opportunities to earn more on your money.
This post will review nine essential accounts that everyone should have to manage money and allow it to grow, regardless of age or stage of life.
Welcome back! I appreciate you joining me for Money Girl episode 902! I'm Laura Adams, an award-winning author, on-camera spokesperson, female money speaker, founder of The Money Stack, a Substack newsletter, and host of Money Girl with over 43 million downloads.
If you enjoy the free content we love creating for you, please take a moment to rate and review the show in your podcast app! If you have a question about money, leave it on our voicemail at 302-364-0308. You can also visit LauraDAdams.com to email me and learn more about my books, courses, and the free Money Stack newsletter.
9 essential financial accounts everyone should have
Use these nine accounts to manage your money more effectively.
1. Checking account.
While having a checking account might seem basic, FDIC data shows that about 4.2% of U.S. households, or approximately 5.6 million adults, were "unbanked" in 2023 without a bank or credit union account.
Carrying and storing large amounts of cash is unwise because it could get lost, stolen, or destroyed. While you might want to keep some cash at home, be aware that it's never covered by homeowners or renters insurance, even after getting damaged or lost after a natural disaster, like a fire or storm.
Instead, everyone should use an FDIC-insured bank or NCUA-insured credit union checking account to keep money safe. I'll explain those designations in a moment. Your checking account is like the Grand Central Station for your cash flow, with income and expenses going in and out.
The best checking accounts offer many free services–like online bill pay, remote check deposit, unlimited transfers, ATM fee reimbursement, and a user-friendly mobile app–that make your daily financial transactions easy. In addition, they don't charge any monthly or annual fees and may pay some interest. I've been a USAA customer for decades and highly recommend them. They serve the military, veterans, and their eligible family members.
If you're unfamiliar with credit unions, they offer highly competitive interest rates you shouldn't miss. The main difference between credit unions and banks is that credit unions are non-profit financial cooperatives, and banks are for-profit businesses.
Credit unions are owned by their customers, known as members, and investors or shareholders own banks. Credit unions exist to serve their members, so they usually offer more competitive products and better customer service.
Like most banks have FDIC insurance, which covers up to $250,000 per depositor, credit unions offer the same insurance amount through the NCUA or National Credit Union Administration. The full faith and credit of the U.S. government backs both types of insurance.
However, credit unions aren't allowed to serve the general public like banks. Every credit union has different member requirements. Some limit membership to defined groups, such as those:
Sometimes, you can become a credit union member by making a small donation to an association or charitable organization. Most credit unions give automatic membership to the immediate family of existing members.
2. Savings account.
Unlike a checking account that allows unlimited transactions, that's not the case with a savings account. You can make as many deposits as you like, but a bank can limit the number of withdrawals per month, such as up to six outgoing transfers.
A high-interest savings account is the perfect place to put money for short-term spending and goals like holiday expenses, vacations, and emergencies. Some even allow sub-accounts for different purposes.
The best high-interest savings accounts currently pay approximately 4% APY, making them excellent for building and maintaining a healthy emergency fund. While investing your cash reserve for higher returns can be tempting, it's best to keep it entirely safe from risk so it's available when needed.
Check out Raisin, a no-fee account where you can spread your money across the highest-yielding accounts from multiple institutions. With one secure login, Raisin gives you access to over 70 partner banks and credit unions.
3. Business banking account.
You should have a separate business checking account if you have part- or full-time business income. That simplifies your record-keeping and makes reporting and paying taxes easier.
Most business accounts allow you to create sub-accounts, which can be terrific for setting aside money for required quarterly tax payments. You could also create a holding account, which is excellent when you have irregular income but want to pay yourself a steady amount that keeps you on budget.
I discuss holding accounts more in Money Girl episode 899, How to Budget With Irregular Income–6 Steps for Freelancers and Self-Employed Workers.
4. Workplace or self-employed retirement account.
In addition to having the right banking products, everyone should regularly use one or more tax-advantaged retirement accounts to invest for their future. You might need retirement income for decades after you stop working, so building your own investments is critical.
Employers offer the most popular retirement accounts, such as a 401(k), 403(b), or 457 plan. Many companies pay additional matching contributions, giving your account a nice boost.
If you're self-employed, you have options like a SEP-IRA or a solo 401(k) to invest for retirement. They allow some of the highest annual contribution limits, making them essential for anyone with business income.
Retirement accounts are powerful places to invest because they give you significant tax advantages. Traditional accounts give you an upfront tax deduction on your contributions and defer taxation until you take withdrawals. Roth accounts require after-tax contributions but allow tax-free withdrawals in retirement.
Just be sure you won't need the money before the official retirement age of 59.5. Taking early withdrawals generally comes with a 10% penalty plus income tax on amounts that weren't previously taxed.
5. Individual retirement account (IRA).
If you don't have a retirement plan at work, are self-employed, or file taxes jointly with a spouse and have little or no qualifying income, you can contribute to an IRA. While you can max out a workplace retirement plan and a traditional IRA in the same year, limits can restrict how much your IRA contributions are tax-deductible.
ALSO LISTEN: Maxing out a 401(k) and IRA–rules, limits, and tax benefits explained
If your income is too high to qualify for deductible traditional IRA contributions, consider using a Roth IRA instead. Since Roth contributions are nondeductible (paid on an after-tax basis), there's never a problem using a workplace retirement plan and a Roth
IRA in the same year.
However, Roth IRAs have an annual income limit to qualify. For 2025, single taxpayers can't contribute to a Roth IRA with modified adjusted gross income (MAGI) at or above $165,000. Married couples filing joint taxes can't contribute with household MAGI at or above $246,000.
While a Roth IRA doesn't give you an upfront tax benefit, it gives you tax-free income in retirement. The younger you are, the more your Roth contributions can grow, providing terrific tax savings. But if you're a high earner, you typically get more advantages from traditional, pre-tax retirement accounts.
ALSO READ: How to use a mega backdoor Roth conversion
6. Brokerage account.
Unlike retirement accounts that typically penalize you for early withdrawals and impose an annual contribution limit, you can withdraw funds penalty-free and contribute an unlimited amount each year to a regular brokerage account. However, the downside is owing tax each year on account gains.
Consider maximizing at least one retirement account annually, and if you still have more to invest, use a taxable brokerage account. It's an excellent place to invest for mid-term goals like buying a home or starting a business in five or more years without taking an expensive early withdrawal from a retirement account.
You can open a brokerage as an individual or joint account. There are many to choose from, but Betterment and Empower are a couple of my favorites because they make it
simple to start.
LISTEN ALSO: 8 robo platform benefits investors show know
7. Health savings account (HSA).
If you purchase an HSA-qualified health plan (on your own or through an employer), you can open a tax-advantaged HSA to pay eligible medical expenses. Note that these health plans work best when you're in relatively good health and aren't likely to spend the full deductible annually.
The beauty of an HSA is that your contributions are tax-deductible, account growth is tax-deferred, and distributions are tax-free if you spend them on qualified, unreimbursed medical expenses. Those triple tax advantages can't be beat with any other account.
Just like with a retirement account, you should never put money in an HSA that you might need for everyday expenses. HSA withdrawals for non-qualified expenses are subject to income tax plus a hefty 20% penalty.
If you qualify for an HSA, they're available at many banks, credit unions, brokerages, and specialty institutions. Most are convenient and offer paper checks, a debit card, and online banking. A couple of my favorites are Lively and HSA Bank.
RELATED: HSA hacks–how to optimize your health savings account
8. Credit cards.
When used responsibly, credit cards offer many advantages, including convenience, purchase protection, an easy way to build credit, cashback and rewards, travel benefits, and a credit line for emergencies. However, carrying a high balance and making late payments can lead to expensive interest charges and negative marks on your credit reports.
There's no limit to the number of credit cards you can or should have. But having at least two is wise, so you have a backup if something goes wrong with one of them. You can have as many cards as you feel comfortable managing and benefit your financial life.
RELATED: How many credit cards should you have for good credit?
9. Kids' banking accounts.
If you're a parent, you might want a bank account for your kids. Kids' banking accounts have three categories: banking apps, checking accounts, and savings accounts.
Kids' banking apps offer innovative features that allow families to automate allowances, set spending limits, restrict kids from shopping at specific merchants, set up a savings account that earns parent-paid interest, and teach kids to spend, save, give, and invest wisely. Greenlight is an excellent kids’ money app to check out.
Kids' checking accounts are joint bank accounts co-owned between a child and their parent or legal guardian. That's because most banks only allow you to open checking accounts for kids 13 or older.
These accounts allow kids to make purchases in-store and online — and most are free to set up and get started. However, kids' checking accounts don't have as many parental controls or financial literacy tools as kids' banking apps.
Kids' savings accounts are available for a child, regardless of age, if they have a valid Social Security number. It's a joint account co-owned between a parent and child, and it typically converts into a regular savings account when they turn 18.
Each of the nine accounts I've reviewed serves an essential purpose in your financial life, whether saving for a short-term goal, making an online purchase, teaching kids about money, paying healthcare bills, or investing for the future.
That's all for now. I'll talk to you soon. Until then, here's to living a richer life!
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