Though there are many different bank accounts available to consumers in their 20s, not all are necessary or beneficial. Having too many account types can make your financial situation much more complicated than it needs to be. A good rule of thumb for this age group is to only maintain the essential accounts. Keep it simple: the fewer accounts, the better.
The most common and useful type of account for everyone is a checking account. You should use this account to pay bills, both by check or direct debit. Debit cards should also be linked to these accounts for everyday spending. A checking account is essential to managing money effectively.
A savings account should be set up with a checking account in order to start a nest egg or build up an emergency fund. These are available at any traditional bank or online. Most offer a small interest amount that increases your money each month.
People in their 20s may not have much money to contribute to a savings account. However, even if it’s just a small amount, you should try to put a little bit away each paycheck.
Money Market Account
A money market account is another type of savings account. This account typically pays a higher interest rate but requires a minimum balance. If the minimum balance is not maintained, there is typically a fee charged. Most 20-somethings struggle to bring in an excess of money to save, which makes maintaining the minimum balance difficult. A money market account may not be a good option if you’re dealing with an unstable income or a low-paying job.
Investment accounts are very important to start in your 20s, even if you don’t have much in the way of disposable income. These accounts include 401(k) and IRA accounts. If your employer offers investment accounts for employees to contribute to, it’s important to take advantage of this. Even if it’s a very small amount each payroll, saving for retirement is much more effective if you start early.
The type and amount of accounts a 20-something needs varies depending on their financial situation. A financial adviser from any bank can assist with this decision. At minimum, you should have a checking, savings, and investment account.