As a couple or young adult starting out on your own, there are a few different financial accounts that you should have. Each type of account has its own purpose and can be a useful tool.
When used appropriately, these financial accounts will help you take control of your money. Over time, managing your money well could help you reach financial security faster.
If you are a newlywed and just married, now is the perfect time to make sure you and your spouse are set up with these accounts. They will let you save more money, grow your investments, and leverage good debt to your advantage.
Each of the accounts that we are about to go over should help you on your goal to manage your money by being able to:
- Pay your monthly bills on time
- Create an emergency fund
- Have some spending money for entertainment
- Grow your wealth through investments
- Make large purchases like a car or house
- Prepare for retirement
Joint Checking Account with Your Spouse
A checking account is the most basic of financial accounts that you should start with. Checking accounts allow you to deposit money and send payments to pay your bills. They have fewer restrictions on how many transactions you can do per month, so they are perfect for managing your expenses on a regular basis.
A checking account will usually be your central account in your bank because your paychecks will get deposited into it. From there, you can move money into other accounts or pay your bills without fees. It is often linked to a debit card, so it is easy to access. Checking accounts are a simple yet essential account that everyone should own.
For couples, you can set up a joint checking account. This will allow you both to access your money since you are both co-owners of the account. Joint checking accounts can be a great way to manage your money as a couple because it gives you both visibility into your finances.
Joint Savings Account for Couples
A savings account is another important financial account that everyone should have. A savings account is set up as a place to store your money long-term without fear of losing it. Most banks secure your money up to $250,000 by the FDIC, so there is very low risk of losing it.
Savings accounts used to be a good way to earn some interest since their interest rates were higher than checking accounts. However, low interest rates across the economy have driven them down, often under 1%. While they might not earn very much interest, there is security in keeping money in a savings account.
Newlyweds can set up a joint savings account that would allow both partners to access the account. Similar to a joint checking account, this is a great way for you both to be involved in your finances. There is transparency into transactions and you both can contribute towards savings.
High Yield Savings Account
Since many traditional savings accounts earn very low interest (mine is currently 0.05%!), a high yield savings rate is a good alternative. High yield savings accounts offer higher interest rates that could get to 2% or 3%.
These higher rates help to fight against inflation so that your money does not lose value over time. Some of these high yield savings accounts may be structured in the form of a Certificate of Deposit, or CD, and will have limitations on how you can access your money. Others will function just like any normal savings account.
Of course, most high yield savings accounts can be opened as a joint account for both you and your spouse. By taking advantage of the higher interest rates, you will be able to better grow your savings.
Credit Card
Credit cards are a way to take on structured debt to help pay for purchases. Once you use your credit card to buy something, you have approximately 30 days to pay off the balance. Be careful with this, though, since credit card companies charge very high interest rate if you don’t pay. Overdue balances can often see 15% to 30% APR interest rates every month that payment is late.
However, credit cards can be beneficial if you have the money and dedication to pay off the balance on time. They help you to build your credit score, which will allow you to borrow money in the future at lower interest rates. This becomes very helpful when you are looking for a mortgage or personal loan.
Another benefit is that you can earn reward points for your purchases. This can equate to money back or other perks just by purchasing through your credit card. This is essentially free money, so take advantage of it.
As a couple, it may be easier for both of you to have your own credit card. This also help you build your credit scores individually, which can be helpful later on. There are joint credit cards available that can be another option if you would like to combine your finances into one account.
Retirement Account
Everyone should start a retirement account as soon as possible and contribute as much as you can on a regular basis. This will let you save up money faster so that you can eventually retire when you are ready. If you are able to save enough early in life, you might even be able to retire early.
Many companies offer 401(k) or 403(b) retirement programs to help you prepare for retirement. Sign up for them and take advantage of any employer match since that is free money. The money in these retirement accounts are pre-tax dollars, so there is a tax benefit to using them.
If your job doesn’t offer a retirement account, you can open your own Roth IRA to contribute towards retirement. A Roth IRA takes post-tax contributions now but allows you to take your money out when you retire tax-free. Similar to a 401(k), the Roth IRA has significant tax benefits, although they are structured differently.
Retirement account are opened separately under each person’s name since they are tied to individual tax benefits. Even though they can’t be combined into a joint account, couples should still track their finances together to see their progress towards their retirement goals.
One great tool to track all of your accounts in one place is Personal Capital. It is a free app that lets you track your spending, investments, and budget.
Investment Account
In order to truly grow your wealth effectively, you need to invest your money. Investing can be in real estate, stocks, bonds, gold, silver, or even fine art. The goal is to see significant returns that outpace inflation and let you earn money from your money.
The easiest way to get started as a newlywed is to open an investment account to invest in stocks, bonds, and ETFs. My preference is M1 Finance because it is a very simple platform to use and has no fees.
Your spouse and yourself can sign up for a joint account and then create a “pie” of your preferred investments. You can pick any combination of stocks and bonds that you think will perform well. ETFs are a great way to diversify your portfolio and decrease your risk since they invest in dozens of different companies.
Be sure to do your research before investing since there is a risk that you could lose some or all of your money. However, educated investing is one of the best ways to grow your wealth over time.
