Fundamentals of Finances

Disclaimer: Nothing in this post constitutes professional and/or financial advice.

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Leading up to my 18th birthday, I began creating a list of financial accounts I would open as soon as I became an adult.

I knew I wanted my money to serve different purposes such as preparing for retirement, saving up for a house, and to form an emergency fund, so I researched the best accounts to get me there.

So, here are the 3 accounts that I opened up on my 18th birthday to set myself up for financial success.

1. High Yield Savings Account (HYSA)

One of the most crucial accounts to have is a savings account. However, I discovered High Yield Savings Accounts (HYSAs) which boast a much higher Annual Percentage Yield (APY) compared to a traditional savings account.

The HYSA I personally chose started with a 4.5% Annual Percentage Yield (APY). This, compared to the 0.01% APY offered for a traditional savings account with a similar bank proved much more effective in growing my savings.

However, when researching HYSAs, I kept thinking to myself, “What’s the catch?”

The catch is that HYSAs have a variable APY. This means that the APY of the account can change over time. For example, a year after opening my HYSA, the APY is now 3.6%, a whole 0.9% less than the account’s initial rate.

Not only can this make it difficult to plan or predict how much my savings account will grow, but when the APY drops, it can also be very discouraging.

However, it is important to remember that while there are other places you can put money for it to grow faster, a HYSA is still a safe and effective account for certain situations.

For example, think about emergency funds. An emergency fund is readily available money that should cover 3-6 months’ worth of expenses.

While putting money into stocks or mutual funds could grow your money quicker, this money is no longer readily available in the case of an emergency.

A HYSA provides larger growth compared to alternative savings accounts, while still being convenient and accessible.

Some popular HYSAs:

• SoFi Checking & Savings
• CapitalOne 360 Performance Savings
• CIT Bank Platinum Savings

2. Credit Card

The next obstacle I wanted to tackle was building my credit score.

Many young adults are scared of credit cards for a variety of reasons. It is common for people to be confused about how to use them, or nervous about them negatively affecting their credit score.

While credit cards can be tricky, taking that first step and opening one is also the easiest way to start building your credit.

One of my long-term goals is to own a home, so I prioritized growing my credit score in order to access benefits such as lower interest rates and better loan plans.

One of the main grading factors of your credit score is the length of your credit history. For me, a credit card was my first credit account, so by opening the card, I kickstarted my credit history.

However, the work is not done once the card is open. In order to effectively build credit, I made sure to use this card diligently. This meant never leaving a balance and making sure I was making payments on time.

As long as I continue to keep this card open, my credit history will continue to increase, which will increase my credit score.

Of course, a credit card is not for everyone and using it irresponsibly can harm your score significantly, so research and education are crucial before taking this step.

Some popular beginner credit cards:

– Bank of America Customized Cash Rewards

– Discover It Credit Card

– Chase Freedom Unlimited Card

(Pro tip: Many credit card companies offer extra incentives for referrals, so if you know a friend or family member who already has the card you want to open, see if that bank offers any bonuses if they refer the card to you)

3. Roth IRA

A Roth IRA is a retirement account that grows with the stock market. You deposit income that has already been taxed, so you won’t have to pay taxes once you remove the money when you retire.

While it might seem strange that I opened a retirement account as soon as I turned 18, it was truly the best time to do so.

I have heard time and time again, adults mention how they should have opened a Roth IRA as soon as they turned 18 and maxed it out every year.

Since the Roth IRA grows with the stock market, the earlier you put money in, the more time the money has to grow. The average stock market return of the last few decades has been about 10%, so putting money in while you’re 18 allows it the most time to accumulate.

However, a Roth IRA has its downsides too.

Since a Roth IRA is a retirement account, the money you put in cannot be removed until you are retirement age, which is currently 65-67 years old.

Additionally, there is a maximum you can put into a Roth IRA per year. As of 2025, this limit is $7,000 a year.

There are some exceptions to both withdrawing money and to the maximum deposit, but they either involve fees, or don’t apply to most young adults.

Popular Roth IRA providers include:

– Fidelity

– Vanguard

– SoFi