The New Grad's Guide to Personal Finance
Cash
Cash is the backbone of your personal financial plan. Before entering the worlds of credit or investing, it’s important to have a solid handle on the actual money that’s coming in and going out. Enter the bank account, a place to securely store your money. In particular, you should have two types of bank accounts open: a checking account and a savings account.
Checking accounts
A checking account should serve as the primary gateway for all money coming in. For example, any income should first be deposited in the checking account before it is moved or spent. You should also use the checking account to pay bills.
A good checking account will have:
- No maintenance fees
- No minimum balance requirements
- A linked debit card for purchases and ATM withdrawals
- High availability/access to withdraw money from ATMs
- Good web/mobile interface that allows you to check balances and deposit checks
My preferred account is the Ally Bank Online Checking Account because:
- It meets all of the above requirements.
- Its linked MasterCard debit card offers a refund on ATM fees nationwide (up to $10 per statement cycle).
- Customer service by phone/chat is professional, effective, and available 24/7.
There is one consideration with online banking solutions, namely that they tend not to have physical branches. If that is a problem, you may want to open a checking account with a bank commonly available in your geographical area in addition to or in lieu of this account.
Advanced use case: If you travel internationally, then you might want to consider also opening a Schwab Bank High Yield Investor Checking Account because its linked Visa debit card offers a refund on any ATM fee worldwide. However, a negative consideration (especially when just starting out) is that applying for this account will result in a hard inquiry on your credit report (more on this in the Credit section).
Savings accounts
A savings account is where you save money for emergencies and the future. Ideally, money just sits here and build interest, and money primarily flows into the savings account from the checking account. In case of an emergency, you can pull money out of savings into your checking account.
A good savings account will have:
- No maintenance fees
- No minimum balance requirements
- High interest rates (so your money can grow while it sits in the account)
- Good web/mobile interface to check balances and handle transfers online
My preferred account is the Ally Bank Online Savings Account because:
- It meets all of the above requirements (with a 1.00% APY interest rate).
- Customer service by phone/chat is professional and available 24/7.
- It offers the ability to create multiple savings accounts that you can designate for different purposes or goals (e.g., emergency fund or saving for a wedding).
Like the checking account, this is an online savings account, so it is not affiliated with a physical branch. If that is a problem, you may want to open a savings account with a bank commonly available in your geographical area in addition to or in lieu of this account.
Summary
- A checking account is where money first comes in and is taken out for day-to-day use. Easy access to ATMs and a good online interface are key. I recommend the Ally Bank Online Checking Account for most people and the Schwab Bank High Yield Investor Checking Account for people who travel internationallly frequently.
- A savings account is the place for your money to sit and grow for emergencies and future goals. I recommend the Ally Bank Online Savings Account.
Next step: Build credit.