Bank accounts can either work for you a little or work for you a lot. Have you heard of the term passive income? This essentially means that you are earning money while doing nothing. For instance, rental properties are often passive incomes because you don’t really have to do much outside of regular maintenance (depending on your terms) and keeping a tenant. The stock market can also be a passive income. On the other hand, active income is where you are physically working for the money. This is like your day job where you earn a salary.
I’m all about your savings account working for you!
The best thing you can do for yourself is to open a high yield interest savings account. I have bank accounts at Ally Bank for this. I actually opened two accounts: one for my house savings fund, and one for my education/general savings. My brother and I both have accounts with Ally and love them. They always have fantastic customer service and are super easy to use. Other great banks are Capital One and Barclays.
One thing I really like about Ally that I don’t think other banks are doing is the buckets feature. This allows you to create subcategories in one account. So, you might have a general savings account with a category for car insurance and one for car payments. This way, you know where your money is coming from. You can set it up to pull certain amounts from each and really tell your money where to go. It’s kind of like the envelope system, but entirely virtual!
Open an interest checking account. Do you see a trend? It’s all about the interest! Again, Ally has an interest savings account, with no minimum amount required and no fees! A checking account is what you need to pay bills. A savings account, especially one opened online (which have higher interest rates) can only have 6 transactions a month on them. This is a federal guideline meant to increase people’s savings abilities.
This actually brings me to a very important thing: no fees and no minimums. You want accounts that are not going to punish you if you dip below a certain number (especially on accident or because you bought a large purchase). Also, you don’t want to be nickeled and dimed (or like $25+ a pop) for a fee because of something silly.
The banks that are going to offer you better interest rates are typically non-local and have very few actual branches. By having less physical branches these banks are able to offer higher interest rates. Higher interest rates do not equal higher fees or minimums.
Along the lines of bank accounts are credit cards. I plan on doing a whole post soon about credit cards, but know this: don’t just open one to have one!
Do you have financial goals for this year?