Six Essential Financial Accounts You'll Need for Life

Here are the only six accounts you will ever need for the rest of your life. This information is as true today as it will be in 30 years.

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1. Checking Account

This is where money comes in and equally quickly goes out. It's just for paying bills, and the balance should always be close to zero. Why? Because your money earns almost zero interest in this account, and therefore it loses value daily.

2. High-Yield Savings Account

This is where your money should be if you're saving it for a known expense at a known time other than your immediate bills. In other words, you can't afford to have it sitting in the market and risk losing it. You also can't afford to have it be in a checking account losing value daily.

3. Roth IRA

This is where you invest money that you do not need in the short term, so it can take advantage of tax-free growth for the long term. Contribute up to $7,000 a year, or $8,000 if you're over 50. Invest the money in low-cost index funds like Vanguard's VOO or Fidelity's FXAIX, and know that you can take back the contributions anytime, penalty and tax-free if you really need them.

4. Traditional 401(k)

This is where you invest money from your paycheck and do everything you can to get the full employer match. Wall Street will tell you there's no such thing as a free lunch, and that's nonsense; an employer match will buy you a free lunch. Invest the money in low-cost index funds or a target date retirement fund and call it a day.

5. Brokerage Account

The Roth is your post-tax account, and the 401(k) is your pre-tax account. You also want to invest money today that you can touch without penalty before age 59 and a half. Invest in whatever works for you, but in my brokerage account, I invest in a tax-efficient, low-cost growth fund like Vanguard's VUG.

6. Health Savings Account (HSA)

If you have a high-deductible health plan, the health savings account is the only triple-tax-advantaged account in the world. Contributions are tax-deductible, investments can grow tax-free, and withdrawals are 100% tax-free, so long as they're spent on qualifying medical expenses.

Conclusion

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