3 Bank Accounts Every 21-year-old Should Open

7 min readJan 7, 2021

[Disclaimer: Please consult your financial advisor to learn about what might work best for your situation. I am not a financial expert. The following advice is based on my (current but always evolving) research and what works for me. You do you. Never blindly take financial advice from people on the internet without doing your own research.]

We all grow up learning different tips and tricks about money. Maybe you were told to steer clear of credit cards, avoid leases like the devil, pay cash for cars, and then told “good luck” as you headed out into the world. Maybe you were privileged with an inheritance. Maybe you grew up without any money. We don’t choose where we come from but certainly can choose the trajectory of our future. So, please explain to me why this stuff isn’t taught in high school?

Below are the 3 bank accounts I wish I had opened when I was 21-years-old. Do you agree? Disagree? What do you wish your 21-year-old self did?

1. Checking Account

Opening a checking account is the first step towards building your financial future. It will serve as an important tool in your toolkit and will be the “home base” for any money you have coming in (such as from a paycheck or gift from grandma) or you send out (for example through PayPal, Venmo, or writing checks to pay bills).

Things to consider:

It’s nice to choose a bank that has a branch in your city, so you have someplace to go with questions or help with more complicated transactions. Or, in the case of online checking accounts, make sure they have good phone and/or chat customer service.
Pay attention to any fees. Some banks will charge you if you don’t have a certain amount of money in the bank or a minimum amount deposited each month.
Ask your friends and family which banks they use and why they like or dislike them. All banks are not created equal. Some have been scarred with a history of financial fraud and questionable security protocols in the past, so shop around.
Explore credit unions near you. Potential benefits of credit unions include lower interest rates on loans, higher interest rates on checking and saving accounts, and a more personal approach to banking.

My personal choice:

I like Chase Checking because they have lots of branch locations in New York, and Schwab Checking because they allow account access at any non-Schwab ATM, like Chase or Bank of America or the bodega down the street.

Resources for further research:

2. Retirement Account

*Yawn* I know, saving for retirement is super boring and you’re sick of people reminding you about it. But the reason why it’s so important to save for retirement is that when you’re 25 years old, you have a lot more options on the table. Want to pay for Law school, or buy a condo downtown or a Tesla Model X? You can get a reasonable or ridiculous loan for all of those things. If you turn 65 and want to retire and have no money, where do you turn? There isn’t a loan for that.

It’s also important because of two magical reasons: compound interest and employer matching.

Chart showing compound interest over time

Compound interest is the engine that makes money grow over time. It’s the reason that you can put $5,000 into your retirement account at age 25, and it could grow to $75,000 by age 65.* A little bit of money now can turn into much more money later!

(*Assuming 7% interest rate compounded annually over 40 years)

Employer matching is a benefit that may or may not be available to you, but it’s something you should absolutely ask about. Let’s say you bring home a paycheck of $3,000 each month, and your employer will match up to 3% to your retirement contribution. This means if you agree to put $90 into your retirement account each month, you will be given an additional $90 FOR FREE when they match that amount. If you don’t take advantage of a matching program, you’re leaving free money on the table.

Things to consider:

There are many different types of retirement accounts including 401(k)s, IRA’s, and Roth IRA’s, each with its own rules and tax implications. 401(k) is a type of account offered by an employer, while an IRA (Individual Retirement Account) is an account you can create and run individually, on your own, and is not connected to your employer. Do your research and speak with a financial advisor to make an informed decision.
When deciding how much to put into your retirement account each month, keep in mind that the purpose of this account is to put money in and not touch it until you retire. There are some specific scenarios in which you can withdraw money without massive tax penalties, but the intention behind the account is in its name. So, contribute what you can, while also being mindful of your other monthly bills and obligations.

My personal choice:

I’m in a privileged position to have an employer that matches retirement contributions to my 401(k), so I did my research to learn how much is matched, and make sure to contribute that much each month. This way, I know I am using my retirement contributions in the most efficient way possible, and am optimizing every dollar.

Resources for further research:

3. Robo-Advisor Portfolio

Robo-Advisor portfolios are accounts that use software to automatically buy and sell stocks, bonds, commodities (like gold and other metals), and exchange-traded funds (ETF’s), based on guidance set forth by very smart financial professionals. Here’s how it works: you dump a lump sum of cash into an account, and the software will use that money to build a nicely diversified portfolio for you, balancing more risk (like stocks) with less risk (like bonds, gold, and cash reserves). As one example, if you put $1,000 into an account, the robot might break that into 50% stocks, 40% bonds, and 10% cash.* The beauty of robo-advisors is that it runs automatically. You just put money in, and you can set it and forget it!

*This is a completely hypothetical example. Your individual custom portfolio will reflect your needs and preferences.

Things to consider:

Some robo-advisors have minimum requirements to open an account, generally ranging from $100 — $5,000. Some have no minimum requirements.
Some will charge you regular annual fees for their management services, while others have no annual fee. These services include making small adjustments to the software algorithm to, ideally, make smarter investment decisions based on the current state of the market.

My personal choice:

I like the Schwab Intelligent Portfolio because it charges no management fees and has a nice mobile app, but it’s worth noting that it does require a minimum deposit of $5,000 to start. Other very good options worth exploring include SoFi (no management fee) and Wealthfront (a very popular choice with low management fee and low account minimum).

Resources for further research:

Bonus Accounts

Here are other types of accounts to consider, depending on your particular interests and needs.

High Yield Savings Account

These are very popular, especially when they come automatically bundled with a new checking account. There’s nothing wrong with high yield savings accounts… so why don’t I like them? Because almost none of these savings accounts live up to their “high yield” name, and unless you’re parking a lot of money here, the gains are pretty minimal. But if you want to explore high yield savings accounts, some popular choices include CapitalOne 360, Ally Bank, and Marcus by Goldman Sachs.

Resources for further research:

Online Stock Broker Account

These will allow you to make individual purchases of things like stocks and ETFs (exchange-traded funds). This is considered medium-high risk territory, but can also produce high rewards if you know what you’re doing. Make sure to get educated on the topic before dabbling, and approach with caution and respect for the amount of risk you’re getting yourself into. What’s an ETF? Exchange-traded funds are a set of stocks, bonds, metals, or currencies that you can invest in, at a lower entry cost and lower risk, than purchasing individual stocks and bonds by themselves. Think of ETF’s as a combo sample platter: a little of these stocks, and little of those stocks. You can get a few bites of each thing, at a lower total price.

Resources for further research:

Locked Safe In Your Closet or Under Your Bed

Lastly, my inner prepper strongly believes it’s always good to keep a small amount of cash at home in case of an emergency. The amount is up to you, but I recommend at least $200, or up to $1,000 in small bills. You never know when having a few hundred dollars easily accessible can get you out of a bind, or if the electrical grid is disrupted and credit card machines stop working, you can still buy food, gas, and essential goods at local stores. It’s best to keep your cash in a locked, fireproof, and waterproof container.

Resources for further research:

Great Resources to Learn More About Personal Finance:

Books:

Podcasts:

3 Bank Accounts Every 21-year-old Should Open

1. Checking Account

2. Retirement Account

3. Robo-Advisor Portfolio

Bonus Accounts

High Yield Savings Account

Online Stock Broker Account

Locked Safe In Your Closet or Under Your Bed

Great Resources to Learn More About Personal Finance:

Written by Chris Alexander