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5 Accounts Everyone Needs for Organized Finances - Fintorialz

5 Accounts Everyone Needs for Organized Finances

Jul 2, 2023

There are different types of financial accounts that every individual should have to keep their finances organized. These accounts all have their purposes and one account should not replace another. It is imperative to understand their uses and to create one when needed.

  1. Checking Account: This is the most popular type of financial account. Most individuals have a checking account. A checking account is where your daily transactions should occur. It is easily accessible and often has a debit card attached to it. The checking account is where friends send money to. Your employer deposits your paycheck here and this is where your checks are cashed. To open a checking account, walk into any bank and inform them. You will be given a form to complete and your account should be successfully opened. 
  2. High Yield Savings Account: A high yield savings account is a savings account with a high interest rate. The customer is given an Annual Percentage Yield (APY) which is usually paid out monthly. This APY is earned depending on the amount the customer has in the account. The HYSA should also hold your emergency fund. These are funds saved up in the event of any unexpected event such as a job loss, death of a loved one etc. In addition, it should also be used to save for big purchases and sinking funds. A High Yield Savings Account should not have a debit card, as the money deposited should only be sparingly used. Currently many banks offer a rate of about 4% or more. Click on this link to create a high yield savings account with a 5.15% interest rate. 

  3. Investment Accounts: This is where you have your regular investments go. Usually the money in this account is untouched for years. The best strategy is to have an individual investment account, and contribute regularly to it. This is to ensure dollar cost averaging, to mitigate the risk on your investments. In addition, the money accrued in one’s investment account shouldn’t be touched. This is to allow the account to grow through compound interest. Investment accounts are usually used to plan for financial freedom and retirement plans. To create an investment account and earn free stocks, click on this link. 
  4. Retirement Account: This is the account where the funding for an individual’s retirement is kept. Accounts like 401k, Roth IRA, traditional IRA fall into this category. It is imperative that the funds in this account are left untouched till a certain age. A retirement account usually has some restrictions surrounding the withdrawal of its funds. A penalty is often meted out when the individual withdraws from this account when they are less than 59 and half years. For an account such as a 401k, most employers will match the individual’s contribution. This implies that if an individual contributes 5% of their paycheck to their 401k account, their employer will contribute another 5%. This is considered free money and you should contribute to take advantage of it.

  5. Health Accounts: This account houses your contributions for medical expenses. These are accounts like Health savings account (HSA) and Flexible savings account (FSA). The money in these accounts might be used to pay for any qualifying medical bill. There could be penalties if the money is used for any other purposes than a medically aligned one. Sometimes, a HSA is also used as an investment account.

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