To handle our money we need to use banks and other financial institutions. We do this for safety and ease. Despite the reputation some banks and financial institutions have, they do have their uses. In this blog, we will look at how to organize your financial accounts so that you can automate most of your finances.
Current Account
The first account we will look at is your current account(UK) it may be named differently where you are.
Benefits of Current Account:
- Accessibility: Easy access to your money for daily transactions.
- Convenience: Pay bills, make purchases, and transfer money easily.
- Overdraft Option: Short-term borrowing if needed.
- Financial Management: Tools for budgeting, saving, and monitoring spending.
Currently, most of us are likely to have the same current account we first opened as a teenager, which we may not have even chosen or it was just the first bank we came across in the high street when we needed to open an account. If this is the case, then it is time to look at what your current account is currently offering and what is now available on the market. Banking just like every other sector has changed drastically over the years and there are very good deals to be had for current accounts that are available with reputable banks.
Below are some of the points you should consider when assessing your current account(UK) that you are using against the new current accounts that you are looking at.
- Fees: Monthly maintenance fees, transaction fees, and overdraft fees.
- Interest: Interest rates on account balances.
- Features: Online and mobile banking capabilities, customer service, and additional perks (like cashback).
- Accessibility: Availability of ATMs and branches, ease of depositing funds.
For most people changing your current account is a hard thing to do because you may envisage the nightmare scenario of having to set up all the direct debits and standing orders over again, and also deal with any issues that may arise with the way your new bank handles the changeover. But nowadays the better banks offer the service of changing all your automated actions on your account over for free, along with a guarantee. So now there is no reason not to give it a try and some banks have been known to pay you to switch over to them so our suggestion is to take some time to evaluate if your current account is up to the job, if not take the plunge and seek out a new current account(UK) which meets all your needs and sign up.
Savings account
A savings account is designed to help you save money while earning interest on your deposits. It is typically more restrictive in terms of transactions than a current account(UK) but offers benefits like interest accumulation and safe storage of funds. Below are some of the benefits of a Savings Account
- Interest Earnings: Grow your money with interest over time.
- Safety: Secure place to keep your funds, often with insurance protection.
- Accessibility: While withdrawals are limited, you can still access your funds when needed.
- Financial Discipline: Helps cultivate a habit of saving money regularly.
Types of Savings Account
The Types of Savings Accounts you will be looking at are:
- Regular Savings Account: Standard account with basic interest rates and few restrictions on deposits and withdrawals.
- High-Interest Savings Account: Offers higher interest rates, often with higher minimum balance requirements.
- Fixed-Rate Savings Account (Certificates of Deposit – CDs in the US): Provides a fixed interest rate for a specific term (e.g., 6 months, 1 year), with penalties for early withdrawal.
When Choosing your Savings Account consider the following:
- Interest Rates: Compare rates to maximize your earnings.
- Fees: Look for accounts with low or no maintenance fees.
- Access and Flexibility: Consider how often you’ll need to access your funds and any transaction limits.
- Minimum Balance Requirements: Ensure you can meet any minimum balance requirements to avoid fees or earn interest.
By understanding these aspects, you can choose a savings account that aligns with your financial goals and helps you save effectively.
Investment account
An investment account allows you to buy and hold a variety of investment assets, such as stocks, bonds,
mutual funds, and ETFs. These accounts can be used for you to build your wealth over time by generating
income or help to save for a specific goal like retirement.
Types of Investment Accounts(in the UK)
- General Investment Account (GIA)
- Individual Savings Account (ISA)
- Self-Invested Personal Pension (SIPP)
- Brokerage Account
- Robo-Advisor Account
When you look at the list of types of investment account above as well as the types of things you can invest in you may feel overwhelmed! especially once you start seeing acronyms like GIA. What can happen is that fear begins to rise in you because you don’t know what it all means and you feel like you never will. This is not the case. When you first learnt to read you were taught the alphabet, the individual letters and then they were joined together to form words and then you moved onto sentences. Organizing your finances will be similar. We will first organize our three financial accounts, current account(uk), savings account and investment account. You can use the ones you currently have if suitable or it’s time to open new ones and then automate your three accounts. This first process is equivalent to learning your abc’s, so this is the first block of your foundation in financial awareness, then as you learn how to use your accounts you will be much more comfortable and confident navigating your way through the acronyms. For now all you will need to do with your investment account is to open one and make a small deposit each month because once you have money invested in something you will take more interest!
This Week’s Focus Points
Your first project is to have your three accounts opened and ready to go. In real life, it may take more than a week but getting started is always the hardest part so check out the below and as Nike would say Just Do It!
Current account(UK): see if yours is up to the task! IF NOT CHANGE IT!
Savings account: check out the rates you’re getting on your savings accounts and again if they’re up to the task IF NOT CHANGE.
Investment account: if you already have one great, if not have a look around for a good reputable one, I suggest you have a look at the Hargreaves and Lansdowne(UK) website to see the type of account I mean, then you could consider using them or have a look for an equivalent and the open an account for yourself. Just remember even if you’re only investing as little as £10 a month it’s worth doing, as the hardest thing to do in investing is to get started. because investments can go down and up, this will be a great way to learn the ropes with minimum risk. So then when you are ready to take investing to the next level you will
have lots of valuable experience.
Enjoy your project and feel free to get in touch with your thoughts
