Research suggests that the average American adult holds around 4 to 5 financial accounts, including checking and savings accounts, retirement accounts, and investment accounts, among others.

By the end of this article, I hope you realize you need more than that.

I know that sounds like a lot, but hear me out.

Without good systems in place, regardless of whether you’re talking about your fitness routine or your work habits, you are more likely to fail when trying to hit your goals. When it comes to your finances, your accounts are a huge part of those systems.

Like everything else I have already gone over in this publication over the last week (this is post four on the topic of Mindful Money Mastery), what is right for you will depend on your financial goals and values, but what I go over in this article is the minimum I would consider to support a large variety of financial situations.

Note: I am NOT a financial advisor, and I am not making any recommendations about investment strategies in this article. Nothing I mention is sponsored. I am a normal person who figured all this out on their own and is now sharing these experiences and knowledge with others.

If you have knowledge of your own to share that I may be missing, please feel free to leave a comment to help others on their financial journeys!

1. Checking Account(s):

At the heart of your financial system lies the everyday checking account — a fundamental tool for managing your day-to-day finances.

I personally have two of these accounts, a joint account with my partner where all of our bills and transfers automate from, and a separate checking account with its own debit card for my own spending.

When selecting a checking account, prioritize accessibility, low fees, and convenient banking features to streamline your financial activities.

While I keep most of my accounts with Capital One, Chime or Credit Karma have been great personal spending accounts for me as well.

None of the accounts I use have fees, but they also don’t have in-person branches, so if that is something that is important to you, credit unions typically have less fees and may be a good option depending on your area.

2. Emergency Savings Account:

Regardless of your financial goals and what you value, an emergency fund is something everyone should strive to have.

Companies no longer reward loyalty; you can be fired tomorrow, next week, or next month. A world-wide pandemic can shut down your business. Your dog could get sick. Life is unpredictable.

Save yourself and contribute as much as you can toward this account until it’s at a level you know could support you for at least a month if something were to happen to your income sources.

Some experts recommend 3–6 months, but I know how daunting that is if you haven’t started yet, so start with one month to give yourself some breathing room and go up from there slowly while working toward your other financial goals.

You’ll thank yourself later, I promise.

3. Sinking Fund(s):

While some expenses occur like clockwork, others are much more sporadic, like and weddings and concerts that you’re dying to go to. That is where sinking funds come in.

You can have sinking funds for all kinds of different things. Some common ones are yearly gift funds, car registration and/or insurance, vacations, or medical expenses. These are funds you want to have handy to easily transfer to your checking account when you want them.

Capital One allows me to have multiple savings accounts, so I have a few different ones set up for my sinking funds. Bonus for me is that this is still separate enough from my everyday spending account that I am not tempted to just transfer cash over when I want to splurge somewhere.

4. High-Yield Savings Account:

When it comes to savings, not all accounts are created equal.

While traditional savings accounts offer very small interest rates, a high-yield savings account offers the prospect of accelerated growth. By parking your savings in a high-yield account, you harness the power of compounding interest to bolster your financial reserves over time.

Maximize your savings potential by capitalizing on accounts that offer competitive interest rates and minimal fees. Whether you start with $5 or $5000, there is no reason not to take advantage of free money wherever it is available.

You can make your emergency fund a high yield savings account and let it sit there making you more money, or perhaps earn interest on your future home or car down payment with a sinking fund, or all of the above. Do what makes sense for you, but do it regardless.

I promise this post is not sponsored by Capital One, but I have been a long-term customer, so I am familiar with their products, and they also offer high-yield savings accounts. Other great options, though, are Ally bank or Marcus by Goldman Sachs

5. Roth IRA:

There’s no way I could talk about different accounts without talking about retirement. Your retirement accounts are a type of investment account that helps you pay for the life you want when you no longer need to (or want to) work.

Unlike traditional retirement accounts, contributions to a Roth IRA are made with after-tax dollars, allowing your investments to grow tax-free. Considering that tax rates only seem to increase, it’s a good bet that the tax rate now is less than it will be when you retire, meaning you pay less taxes on your money with this type of account.

While this seems like a no-brainer, these accounts do have limits.

To contribute to a traditional Roth IRA, you have to make under a certain amount (the limit at the time of writing is $146k for a full contribution) and can only contribute a certain amount per tax year ($7k for those under 50 years old at the time of writing).

Get as close as you can to maxing this out as your first step to saving for retirement, UNLESS your employer offers a 401(k) match, which brings us to the last type of financial account you should consider.

6. 401(k):

For many individuals, employer-sponsored retirement plans such as the 401(k) represent a large part, if not all, of their retirement strategy.

These plans offer a dual benefit: contributions are made with pre-tax dollars, reducing your taxable income, while employer matching contributions provide an invaluable boost to your retirement savings.

By maximizing your contributions to your 401(k) plan, you harness the power of tax-deferred growth and employer incentives to build a robust retirement nest egg. However, you will pay taxes on this income when you withdraw it. This means you potentially pay a lot more in taxes than you would through an IRA.

Taxes are no reason to leave free money on the table, though.

My recommendation is that, if you have access to an employer match, contribute enough to maximize your employer match to the 401(k). Then, if you can afford to, contribute to a Roth IRA every month. To max that out, you’d have to contribute about $583 a month.

If you can contribute more to retirement every month than your 401(k) match and IRA limit, and it aligns with your values and financial goals to do so, then contribute more to your 401(k) at that point.

This is how the average person can retire a millionaire with a diversified portfolio.

Its cliché, but it’s true: the best time to start investing is yesterday. The next best time is now.

Side Note: About once a year make sure you log in to these accounts and adjust your investment allotment as needed. These accounts don’t accrue returns unless you take the time to actually set the money in there to invest in something, but once you do, that compound interest and returns will slowly start to make a huge difference.

Most retirement accounts will have easy ways to guide you through this set up; you do not need to pay someone to do it for you unless you want to.

My personal favorite retirement platform is Fidelity, but my sister swears by Vanguard; either one is good. I am sure there are others, but I am not personally familiar with them, so I am recommending what I know.

It’s a lot of work to go through and clean up your financial accounts, but it is worth it to have the peace of mind knowing that your money is working for you and helping you reach your goals. One afternoon online could have your entire financial system set up to support you. Do it for future you.

If you missed the first three articles I wrote on this topic, I recommend you catch up on the Financial Foundations articles from this week. Everything from mindfully setting financial goals to overcoming bad spending habits has been covered in detail, starting here.

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