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About Savings Accounts between Investing Accounts

Savings accounts do have great benefits. Savings should be allocations of cash put aside for short term goals. Savings should also be used for personal expenses like loan payments, utility bills, and insurance. Savings accounts should also be used for anything in life that will require a large amount of cash in five years or less. The stock market can fluctuate and losing value of money while trying to achieve a short term goal is counter productive.

There are numerous types of investment accounts. There are a plethora of services offered with both discount brokers and full service brokers. Most people go to full service brokers because they like face to face transactions and customer service while others prefer internet based discount brokers because they don’t value face to face interactions. Since Millennials are tech savvy and don’t have money to be throwing away for steep fees, most young investors go the discount route.

I own an account with a discount broker because I like to micro manage my investments and I firmly believe Millennials should go in this direction as well. Most accounts are free to open, and I highly recommend using TD Ameritrade because of their vast array of pointers and customer service that goes above and beyond most other companies.

Once you’ve found yourself a brokerage firm that you find fit for your needs, its time to determine which account type fits your needs. Account types include a Roth IRA, Traditional IRA, Cash, and Trust. Brokers will offer more sophisticated accounts as well but most new, young investors won’t need to dabble in those right off the bat. Each account has its perks but to start out, a cash account is the most efficient. It’s essentially a bare bones trading account that allows for deposits and withdrawals along with trading abilities.

Commissions

Most brokerage firms charge commission fees. There’s no getting around these pests unless your account is through Robin Hood but there is a learning curve and TD’s customer service is worth the $9 per trade commission; at least in the beginning. These commission fees are, essentially, the cost of transferring your cash into a stock purchase which is then put in your account for you to monitor as it grows (or declines). Although some brokers may offer lower trade fees than others, they are often indicative of other aspects like customer service, technology, and trade speeds so it’s not always best to be cheap. On the flip side, full service brokers can charge up to $200 per trade which is far too steep for most Millennials just looking to put a couple hundred dollars away at a time.

Other Fees

The finance and banking industry is really good at hiding fees for unknowing victims. Brokerage firms can charge for inactivity, margin, mutual fund trading fees, and much more. This obviously is a deterrent however, once again, I’ve found TD Ameritrade is the most upfront about their fee structure and it usually doesn’t have any impact on novice traders. Another angle of attack is account minimums which is an obvious roadblock for most Millennials. That being said, TradeKing, USAA, and TD Ameritrade have no minimum.