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How to Plan Your Financial Future

Lesson 9 of 18

What You Should Expect from Your Bank Accounts

Erin Lowry/Broke Millennial

How to Plan Your Financial Future

Erin Lowry/Broke Millennial

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Lesson Info

9. What You Should Expect from Your Bank Accounts

Lesson Info

What You Should Expect from Your Bank Accounts

So, I'm gonna now pivot into a happier topic of what you should be expecting from your bank account, and if anyone has questions first about the fees, please feel free, show of hands in here or dropping them in the live chat. Happy to be coming back to any conversation about fees at any point while we go through picking better financial products, so please be sure to also engage in the class as well. So here's what you should expect. First, no over-the-top fees. Again, for-profit institutions, I get it, but I do feel like there's a difference between gouging and just having a little bit of money, though you should never have to be paying a monthly maintenance fee in order to get access to a checking account, and I say that because there are a ton of options where you don't, so if you're currently paying that, you're going to ditch that bank and switch to something else where you're not paying a monthly maintenance fee. Definitely no minimum account balance. Again, who is this targeting...

? It is not targeting people with a lot of money. It's targeting people who don't, and those are people for whom $10, $12 a month does make a significant difference in their budget. So, coming back to this idea of respect. I want you to not have an overdraft protection fee, to not have to pay money to move your own money from savings to checking. Now this one, too. A lot of people are just so used to paying ATM fees that we don't really think about it, but there are actually options where you are not charged by your own bank to use another bank's ATM, and on top of that, they will reimburse you for the fact that this other bank is gonna have charged you a fee. So these banks exist. We're gonna get into where they are and how you can find them. Now some of them have a cap and say, hey, we're gonna reimburse you up to $9 or $15 a month. Others have unlimited reimbursement. Some are domestic, some do internationally. So depending on how often you actually go to an ATM and what kind of traveler you are, that also should be informing which bank account you're picking. And then, also, I want actual savings. I think your goal in life should be to be earning at least 1% APY. Those who are older than the Millennial generation remember a time where savings accounts gave you a whole heck of a lot more than that. There's all of this talk about 5% and 8% way back in the day, but for us, 1% is a really good baseline to be thinking about. That's something that is very feasible. You can definitely get access to this. So I want you to think about it this way. If you have $1,000 saved, it's that emergency fund we talked about earlier, at 1.25% APY, you'll have earned $12.50 in interest over the year. Is that a ton of money? No. Is it life-changing, I'm-gonna-get-rich-off-of-this, money? No, but if you have it at a bank with pitiful .01%, you're getting a whopping dime out of them for the year. So again, coming back to this idea of respect. I want them to be respecting the fact that they are your bank. You are putting your money with them, so they're giving you a respectable interest rate on your accounts. So where are these magical accounts that I've been talking about? These are internet-only banks that typically offer the most competitive rates. Sometimes, you'll hear them be referred to as online banks. I like to say internet-only because online kinda sounds like, well, any bank now really does have an online presence, so that can get confusing. Internet-only banks are banks that typically do not have any brick-and-mortar locations, or if they do, there's only one or two in the entire country. There are very few of them, and so, they're essentially putting all of that savings from not having to pay property taxes and to build a building and keep the lights on and pay the employees. That's money that's really going back into your pocket as a customer of the bank. So he exists more or less entirely online. They are safe. They are FDIC-insured. We will be getting into that shortly. Now some actual options, just to give you a sense, include Ally, USAA, Capital One 360, and Charles Schwab. I will say, with USAA, you have to have a military affiliation in order to get access to that bank account, but the other ones are open, really, to any member of public. And again, coming back to this idea of, they typically do not have brick-and-mortar. Some of them do. Some of them, you will see cafes or shops around, perhaps where you live. Now there is one group that this is not a magical account for, and that's people who deal primarily in cash. That is one problem with the internet-only banking, and that's that it's very difficult, then, to deposit cash because there's not a physical location for you to go to, but what you could do is have a checking account perhaps at a bank or a credit union in your community where, you know, you can go and deposit at the bank, or you can go and deposit the cash, and then you can have a savings account with one of these guys that has a much more competitive interest rate. Just something to think about as options. Now how do I make sure this is safe? That's usually my number one question when I talk about online or internet-only banks because you can't physically see it, so it feels a little bit iffy to some people. One, you always wanna make sure that any bank that you're using is FDIC insured. FDIC stands for Federal Deposit Insurance Corporation. It is an independent agency of the United States government. A way to think about it, if you've ever seen the movie It's a Wonderful Life, and you see that moment where there's the run on the bank, and people are in the Depression era trying to get all of their money out of the bank. Well, the FDIC actually came out of the Great Depression. It was when there was all these runs on the bank, and people just could never actually recoup the money that they had put into the physical banks. So the FDIC now is basically an insurance policy for the banks, so if your bank fails, your money is insured by the federal government up to $250,000. That doesn't mean you get $250,000 if your bank fails. It means that the amount of money you have in there up to 250 is what you get. So if you have a million dollars in savings, you actually might wanna put them around in different banks so you have insurance policies across your money. Just something to think about once we get so far out of the broke Millennial phase, we're at that kind of money. Another way is to just do a simple Google search and check for scams. Put the name of your bank and the word scam in, and see what comes up. Ask friends and family members what do they use, what's their experience been, how do they like it? Reddit tends to be a really good forum, too, for sniffing out anything like this. People are certainly very vocal about any negative experiences they've had and talking about scams as well, and those are ways you can make sure it's safe, but again, only ever bank with an institution, if we're talking about American banking products, that is FDIC insured. Any other questions from folks about bank accounts? A question from Onia, who's watching online. (clears throat) Excuse me. We do have a lot of people who are outside the US, so in that she's in Europe. Are there places that you would recommend or what to search in Google with regards to outside of the United States when you're looking for great financial products? I cannot speak to non-American financial institutions because I don't know, for one, where you are in Europe, so the unique experience of your financial institutions in your country, but I will say I do know there are a lot of European models for our price comparison websites. Actually, near most of our American versions are based off of ones that came out of London, so definitely take a look and see if you have a company, I'm sure you do, that's specific to your country that can help you compare different financial products.

Class Description

Short on time? This class is available HERE as a Fast Class, exclusively for Creator Pass subscribers. 

According to the experts, millennials won’t be able to retire until they’re about 75 years old, and that’s if they’re lucky! And some data shows that three-quarters of Americans are not ready for retirement at all. No question about it, people of all ages and backgrounds are woefully unprepared for their golden years.

Most of us are too busy worrying about our current debts and daily costs of living to even think about retirement. But Erin Lowry shows you that putting just a small amount aside each month as early as possible will yield great results. She’ll give you solid advice about how to avoid excessive fees, costly financial instruments, and shady financial advisors.

Erin will also address how to talk about money with the important people in your life, especially those with whom you’ll be sharing your finances. It’s the best way to determine your financial compatibility and help you achieve your financial dreams.

In this class, you’ll learn how to:

  • Make compound interest work for you so you can retire at a reasonable age.
  • Find the right retirement account for your specific needs.
  • Figure out your level of risk tolerance and time horizon.
  • Choose an honest, helpful financial planner or advisor to help you reach your goals.
  • Navigate awkward conversations about money and feel less vulnerable.
  • Decide if you want to work as a team to achieve your financial goals.
  • Identify red flags about people’s financial habits and lives.

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Chris Sundell

Amazing course!! Great instructor! Everything that's essential is covered. This has been the kick starter to my new year. Thank you!