I’ve been teaching high school for five years now. You would be SHOCKED at how many of my SENIORS tell me that they don’t have a bank account. Or… maybe you wouldn’t be, because you were a senior in high school and you didn’t have a bank account.
By the time you get to the adult world, you can’t keep all your money under the mattress, in a sock, or in Ole Porky (or in my case, a GIANT glass jug… the thing weighed more than I did most of my childhood). Honestly, if you’re an adult, you probably already have at least two of these accounts. Success! But our goal is to build wealth and financial freedom here, so we need to learn about ALL necessary bank accounts for that. If you make it to the end, there’s even a bonus account type that most non-finance people don’t even think about!
A quick disclaimer: I have these in order of importance, according to my own finances and what has worked for me for the past 13 years. Your financial needs and priorities might be different based on your own finances. And remember, this is a blog to learn about financial information. I am not your financial advisor and cannot guarantee any financial results. There also might be affiliate links on this page, but I will NEVER recommend anything that I do not personally use and love.
1. Checking Account for Bills
Your bill-checking account is going to house all of your money for anything that comes out of your account regularly. Think about monthly bills (rent or mortgage, some utilities, subscriptions) AND irregular bills (some utilities, subscriptions, and insurances only charge you every 90 days or once a year).
There are three things that most finance people won’t tell you to put in this account, but we live in reality, so we are going to put these “bills” in this account also: 1) groceries, 2) gas, and 3) childcare. These three costs might be variable instead of fixed like most bills. BUT if you don’t have the money to pay for these things during the month, you are screwed. If you aren’t sure how to plan for costs like these in your bills account, head over to our post about Budgeting. It’s post three in our Finance For Beginners Series.
Now, this is an important thing that will set you up for future financial freedom:
You should have a cushion of extra money in this account AT ALL TIMES. I personally keep an extra $200 in this account every month as my cushion, but it can be however much you think you need. Because this is the account that is going to be auto-drafting (when money gets automatically pulled out for a bill), you need to have a little extra in case your electric bill is higher than normal or your kids are unexpectedly home for the week (and eating everything in sight) because of a freak snow storm. Too soon?
2. Checking Account for Free Spending
When you have extra money in a month after you’ve accounted for everything you NEED to have money for, it will go into this account. This money will be used for extra things that aren’t a fixed expense and don’t HAVE to be paid (eating out, hobbies, fun activities, that game you’ve been wanting to buy that FINALLY went on sale). My husband calls this “fun money.”
My accounts are set up so that a certain amount of our monthly paychecks automatically gets directly deposited into “Bills Account” and a certain amount gets directly deposited into “Fun Account.” I asked my HR if they could do this, and they said it was no problem. I recommend seeing if your HR would be able to do this too so that you don’t have to schedule a transfer between your bank accounts yourself every month or two weeks.
Again, if you want to learn more about figuring out exactly how to calculate this amount, you can read our Budgeting post here.
3. Savings Account
Most people who don’t make a lot of money use the normal bank savings account as their long-term savings, but that is a terrible idea. This normal bank savings account should only be used for short-term savings. This is for two reasons:
1. The interest rates are SUPER low, and you are losing money from inflation.
I bank at Truist (not sponsored and don’t necessarily recommend this bank over others), and my savings account is currently earning 0.01% APY. That means I get $1.00 if my bank account has $10,000.00 in it all year. Meanwhile, the 2024 inflation rate was 2.89%. That means my $10,000 lost about $288.81 of worth in the same year.
2. Banks charge fees and have the weirdest requirements for these accounts.
Truist, for example, requires that I have at least $300 in this account or a minimum monthly deposit of $25, and I can only withdraw money 6 times in a month. Or I get fined.
You should still have a short-term savings account, but don’t leave a lot of money in there. I personally have the $300 minimum in mine. Ya know, just in case I forgot about a birthday and need to run out and get a gift real quick.
4. Emergency Fund
This should be a high-yield savings account! Don’t know what that is? Learn more in the second post of this series here.
If you are just starting to organize your finances, this emergency account is ESSENTIAL to building financial freedom. People who don’t have an emergency account go into debt. We live in reality. Emergencies happen, and you need to plan for that.
Emergency fund goal number one: $1,000.
This might be hard to do for you if you don’t make a lot of money and you don’t have a lot extra after bills. HOWEVER, prioritize this. If you don’t have even $1,000 set aside, you DO NOT need to be spending anything on “fun” before you have that. I know that sounds harsh, but being poor is expensive because there is no extra money for things to go wrong. It’s how you get trapped in a never-ending cycle: You save $400, your car breaks down, you have to pay $400 to fix it, and you never get to save up to buy a better car.
Emergency fund goal number two: 3-6 months of bare minimum living expenses.
I saw your jaw hit the floor. Pick it back up, and let’s get serious. Nearly half of Americans live paycheck to paycheck. That means if they lost their job today, they’re screwed. Having 3-6 months of expenses squirrelled away for a crisis means that you have freedom (that’s our goal here, remember). You can wait for the job you want instead of jumping at any job willing to hire you. You can keep paying your rent or mortgage. You don’t have to worry about where food is going to come from.
In a very personal example, my own house was damaged back in October 2024 from Hurricane Helene. I can’t tell you how much I wanted an adultier-adult to just take over and fix things for me. My roof repair was $13,100, and my insurance would only cover 39% of that cost. FEMA denied my claim within 3 hours of submitting it because I had insurance and an appeal would take (in their own words) 90 days. SBA Disaster Relief Loans just emailed me an offer on January 14th (2025) because of a lack of federal funding. I had to pay $7,991 on my own to cover the repair. If I didn’t have enough money to cover those expenses in my emergency fund, I would have had to take out a high-interest personal loan or put it on a credit card, which would’ve ended up costing me thousands more in the long run.
If you’re not sure how to calculate how much you need for 3-6 months of expenses, go read our guide to Savings here. It’s post two (the next one) in our Finance For Beginners Series. That post will also show you how to save up that much money!
I’ve been using Wealthfront since 2020 for my high-yield savings. If you’d like to open a Wealthfront high-yield savings account, you can use this code: HERE. Both of us will get an extra 0.50% APY bonus for 3 months once you fund your account! Win-win!
5. Sinking Fund
This should be a high-yield savings account, too!
Sinking funds prepare you for non-emergency future events. This is the really exciting account! Anything that you are looking forward to that is going to cost you (potentially) a lot of money needs a sinking fund. Think about travel, birthdays, holiday gifts, down payments for a car or house, etc.
I personally have one for travel, one for holidays and birthdays, and one for our dogs (the annual vet bill is $700!). You can have as many as you want or need, but I find that 3 is the perfect number for me so that I’m not spreading myself too thin. Essentially, how this account works is that you put in a little each month, and the money is all there when you need it. For example, $100 a month is $1,200 for holiday gifts around December. More information about this type of account is also in our guide to Savings here.
Bonus! A Certificate of Deposit (CD) Account
CDs are one of the most under-used types of bank accounts for normal people. This is because most people don’t fully understand it, and they’re a little scared of it. CDs can be scary for one reason: you have to leave your money in the CD no matter what, or you pay a penalty.
Don’t let that scare you! CDs come in all different time limits and all different rewards, as a result. You can get a CD for as little as 3 months or all the way up to decades, depending on the bank. The more time you have a CD locked in for, the more interest you’ll receive in the end (usually). This type of account is perfect when you’re saving up for a big purchase in the long-term future and you have extra money now. For example, if you have $1,000 and you want to buy a car in 2 years. You can put that in a CD with a 4% APY. In two years, you’ll have $1,081.60 guaranteed just because you didn’t touch the money!
To put that in perspective, investing the money might lose you money, and then you wouldn’t even have $1,000. Putting it in a high-yield savings account might only get you a 3.8% APY (the current average in January 2025) and a whole $4 less in the end. I’ve also seen CD interest rates as high as 5.7% right now, giving you $1,117.25 in the end!
Set Your Accounts Up Now
“The best time to plant a tree was 30 years ago. The next best time is now.“
George Bagby, “Our Ruined Rivers,” in Georgia Game and Fish (November 1968)
Maybe you are learning all of this for the first time now. Maybe you’ve heard all these things, and you just never knew what they really meant. Either way, it’s our goal for you to take the first step to building wealth and freedom and becoming the next generation of success. Start today and watch your life change.
Continue learning with the next post in our Finance for Beginners Series here. This one’s about savings!
If you would like to see a tutorial about how to set up any of these accounts or if you have any questions, please comment below! We’d love to hear from you!
