subject: Money Management--4 Accounts Every Woman Should Have [print this page] Money Management--4 Accounts Every Woman Should Have
Money management can be easier if you have these four accounts. Financial advice for women often focuses on saving money or learning to invest. It's just as important to set up the right types of basic financial accounts.
1. First, do you have a checking account and ATM card with your name on it? It doesn't matter if you share the account with a spouse or significant other. Just make sure your name is on the account, and that you have the ability to pay bills and withdraw money. Most of us take this checking privilege for granted, but it's the most basic money account we all need.
2. Second, do you have an emergency fund? I like to call it comfort-cash. This should equal whatever you might need to get through unexpected hardships that crop up, from job losses to car breakdowns.
When you're prepared with at least 3 or more months of living expenses, you're less likely to borrow from high-interest credit cards, or sell your retirement investments with penalties or losses.
Where should you keep a comfort-cash fund? Put it in a bank money market account or savings account, or in a money market mutual fund. Yes I know, these don't pay much, but the key here is liquidity. You need to be able to get to those funds quickly when you need them, without suffering any loss of principal.
3. Third, do you have a major credit card in your name only? It's OK to share one credit card account with a spouse, but every woman should also have a different account with just her name on it.
You want to make sure you're building your own financial identity, which tracks to your social security number, and that you are the only influence on that account. In case of a later divorce or loss of partner, you've got your own credit history and FICO score established.
If you don't qualify for a credit card with good terms yet, look into getting a secured credit card, backed by a savings account you set up when you apply. You prove you're responsible with paying off card debt, before moving to a standard, unsecured credit card.
4. Fourth, do you have a retirement savings account in your name? This might be the 401(k) or qualified employer plan at your workplace, or an Individual Retirement Account (IRA). Retirement accounts provide tax-deferred or tax-free savings, which grow faster without current taxation.
If you don't have an employer retirement plan, but you do have earned income, open your own IRA, either Roth or Traditional IRA. If you're not working, but your spouse is, consider a Spousal IRA. These help build retirement accounts for a spouse who has low earnings, or is helping raise the kids at home.
Now, how did you do? Don't worry if you lack one or two of these categories. But make a priority of establishing what you still need. You'll be setting up your own safety net, helping insure access to cash, and building financial security by owning these four accounts.
