A Beginners Guide to Bank Accounts

Most people thinking of typical savings and checking accounts that you open through any type of bank when they imagine a bank account but there are a lot of different bank accounts you can open that are more complex than you may think.

Here is a simple guide to many different bank accounts you can open:

Personal Savings: bank account meant for storing and growing your money; usually has a high interest rate and you can withdraw and deposit money into it.

Personal Checking: bank account that lets you withdraw and deposit money easily for daily transactions for example, with a credit or debit card.

- typically kids/teens checking and savings accounts have less interest and more limits on transaction amounts than accounts opened by adults.

Brokerage Account: a type of investment account that allows you to invest in the stock market and buy and sell stocks, bonds, mutual funds, ETFs, etc. These funds can be used however you want but you have to pay tax after you withdraw money from it.

401k: a retirement savings account typically offered by your employer (usually a for profit company) that you do not have to pay taxes on as long as you withdraw money after age 59 1/2. The money in a 401k account is invested into the stock market which means its balance will fluctuate based on the market.

403B: a retirement savings account very similar to 401k but has lower fees and typically offered to non-profit and government employees.

529k: a college savings account where money withdrawn is tax free but can only be used on college or higher education. The money in this account is also invested in the stock market and mutual funds/ETFs just like a 401k.

Roth Ira: another type of retirement savings account that you can open and withdraw tax free after age 59 1/2. Like 529k's and 401k's, the money in a Roth Ira is also invested into the stock market. However the difference in a Roth Ira is that there are income and contribution limits so the amount of income you make determines how much money you are allowed to contribute/deposit into your Roth Ira that year. If you make more than $153,000 as a single filer or more than $228,000 as a married/joint filer per year you cannot contribute money to a Roth Ira.

There are Roth Ira accounts available to minors (called a custodial Roth Ira) who are working and their contributions cannot exceed how much they earn in that year.

Below is a table detailing how much you can contribute to a Roth Ira per year based on income.

Certificate of deposit (CD): a type of savings investment/bank account that has a higher interest than a typical savings account because after you deposit money in you cannot withdraw or do anything with it for a fixed period of time these are beneficial if you want a low risk investment or are trying to save money for a specific thing.

Money Market Accounts (MMAs): a type of bank account that offers features of a checking and saving account, typically have higher interest rates than regular savings, and come with other benefits such as check writing or debit card use. Beneficial if you want a high interest rate and are saving up to buy something but have more restrictions than other types of bank accounts.