In school, I learned the basics of personal finance, such as budgeting, saving, and spending. However, I wasn’t taught how to build real wealth. Fortunately, through extensive reading and mentoring, I’ve been able to chart my own path to financial success, and I want to pass that knowledge on to you.
In this article, I aim to share with you the most important insights I have gained as a multi-millionaire: the seven crucial accounts most wealthy people have. So, if you’re ready to take control of your financial future, let’s dive in.
1. High-Yield Checking Account
You might wonder, “Why is a checking account on this list?” The answer is simple. Most people leave their money in a traditional checking account that earns almost no interest. On the other hand, wealthy individuals invest in high-yield checking accounts, which offer much better returns.
For those unfamiliar with them, a high-yield checking account provides both convenience and a competitive rate of return. If you want your money in one place instead of splitting it between a savings and a checking account, an interest checking account may be convenient for you.
Investopedia reports that the best high-interest checking accounts are paying at least 4.00%, and the top account is paying an annual percentage yield of 6.25%. This starkly contrasts the near-zero interest rates that many banks offer. You might consider moving your money elsewhere if your bank doesn’t offer competitive rates. Remember, even in a checking account, your money should work for you.
2. High-Yield Savings Account
As with high-yield checking accounts, high-yield savings accounts are essential for growing wealth. This is where you should keep your emergency fund and other liquid assets. Here, ensuring your savings account earns a competitive interest rate is key.
Most high-yield savings accounts continue to offer yields above 4 percent, more than eight times the current national average of 0.58 percent. You can find a list of banks that offer savings accounts with interest rates above 4% on Bankrate. You’re losing money if your bank pays you less than that. We want our dollars to earn as much as possible while remaining accessible in case of an emergency.
3. Tax Savings Account
Whether self-employed, freelance, or own a business, a tax savings account is non-negotiable. While traditional employees have taxes deducted automatically from their salaries, independent earners are responsible for setting aside money for quarterly tax payments.
If taxes are not planned, a large bill can result at the end of the year, potentially straining your finances. When you set up a separate tax savings account, you avoid scrambling when it comes time to pay your taxes. Better yet, keep your tax money in a high-yield savings account so it earns interest while it sits there.
4. Personal Equity Fund
Investing in yourself is one of the best investments you can make. As such, the purpose of a personal equity fund is to improve one’s own self, including;
- Attending conferences
- Hiring a business coach or mentor
- Enrolling in professional courses
- Investing in personal development programs
Many people consider these expenses unnecessary. However, the wealthy know that personal growth leads to higher incomes. You can continuously enhance your knowledge and skills if you allocate money specifically for self-improvement.
5. Roth IRA
A Roth IRA is a must-have for anyone serious about building wealth over the long term. Unlike traditional retirement accounts, Roth IRAs offer tax-free growth and withdrawals in retirement. As a result, once your money is in a Roth IRA, it can grow tax-free.
As of 2024, single filers cannot contribute to Roth IRAs if their modified adjusted gross income (MAGI) exceeds $161,000 ($165,000 in 2025), while married couples filing jointly can contribute up to $240,000 ($246,000 in 2025). However, if your income exceeds these limits, you can still participate in a backdoor Roth IRA. By contributing to an IRA and converting it to a Roth IRA, you can benefit from tax-free growth.
6. Self-Managed 401(k)
While most people are familiar with employer-sponsored 401(k) plans, self-managed 401(k) plans offer greater flexibility and investment options. With a solo 401(k), you can save for retirement as an employee and an employer.
In other words, solo 401(k) contributions have two parts: employee and employer. The total limit for 2024 is $69,000. You can contribute up to $23,000 (or 100% of your compensation, whichever is less) as an employee. If you’re 50 or older, you can add an additional $7,500. Employers can contribute up to 25% of their compensation or net self-employment income (up to $345,000).
The limit will rise to $70,00 in 2025. In addition, the employee contribution limit will increase to $23,500 (or 100% of compensation, whichever is less), with the same $7,500 catch-up for those 50 or older. A new provision gives those aged 60-63 a higher catch-up, up to $11,250. In addition to the $350,000 compensation limit, the employer contribution remains at 25% of compensation or net self-employment income.
It’s important to note that employee contributions are limited across all 401(k) plans, not just solo 401(k)s. This means you can’t contribute more than the limit if you have a 401(k) through your regular job.
Overall, this is a powerful tool for building long-term wealth and maximizing tax benefits.
7. Brokerage Account
It’s important to have retirement accounts, but you shouldn’t limit your investments to tax-advantaged accounts. With a brokerage account, you can invest in stocks, ETFs, and other assets without withdrawal restrictions.
Unlike retirement accounts, taxable brokerage accounts give you access to market opportunities. To be successful, you must invest wisely, focusing on long-term growth rather than short-term speculation.
Conclusion
It is not luck that builds wealth — it is strategy. These seven essential accounts are the first step to creating a solid financial foundation. Whether you are just beginning your financial journey or are looking to optimize your current financial situation, these accounts can help you grow and protect your wealth.
Remember that wealth-building takes time. It is okay if you don’t have all these accounts right now. Begin by establishing what you can and gradually building your way up. You need to take action now to enjoy financial freedom in the future.
FAQs
How do I choose the right savings account?
There are several types of savings accounts, each with its own features. A traditional savings account offers an introductory rate of return, but a high-yield account provides a more competitive rate.
In addition to offering higher interest rates than traditional savings accounts, money market accounts may limit your ability to write checks or use debit cards. Before making your choice, consider your savings goals and your access needs.
What is an investment account, and how does it differ from a savings account?
Stocks, bonds, and mutual funds are held in an investment account. Unlike savings accounts, which offer relatively low but stable returns, investment accounts provide the potential for higher returns but are also more risky. Although you can lose money when you invest, growing your financial resources over time is essential.
What is an emergency fund, and where should I keep it?
An emergency fund funds unexpected expenses, such as medical bills, car repairs, or job loss. You should keep 3-6 months’ worth of living expenses in your emergency fund. High-yield savings accounts are a good place to keep this money due to their accessibility and potential for earning interest.
How do I choose which financial institutions to open accounts with?
Consider interest rates, fees, accessibility (online and physical branches), customer service, and the services offered—research different options to find the right bank or credit union for you.
How can I manage all these accounts effectively?
Online banking and budgeting apps can help you track your balances, transactions, and overall financial progress. However, reviewing your accounts regularly and adjusting as needed to achieve your financial goals is critical.
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