A Basic Overview of Different Financial Accounts

In order to succeed with money it's important to understand the basics. What is a money market account? Is that better than a CD? What is a HELOC? Should you have one? Understanding the basics is an important step to winning with money.

Transcript

Hello, my name is Tiffany, and welcome to the podcast Working on Amazing. This is the podcast where we talk about the work that it takes to rebuild an amazing life.

Now on today's episode, we're going to be talking about different types of financial accounts that you might have or you might want to open. Financial literacy is a huge part of winning with money.

How can you win with money if you don't understand the basics? So today is just educational content, just talking about the different types of accounts, the pros, the cons, what to expect with different types of financial accounts that you can open.

OK, there's kind of a lot.

This is by no means a fully extensive list, but we're just going to be talking about a few of the most common types of financial accounts you might run into, because a lot of times, people will refer to these accounts by their acronym.

And if you don't really know, you kind of don't want to ask. You know, once you're an adult, you don't feel like, can you please explain to me what a HELOC is? What are you talking about?

But let's talk about it today, because there is no shame in not knowing. You don't know until somebody tells you. There is a lot of stuff to cover, so let's get down to it.

Now, just a brief reminder, when I worked on Rebuilding My Life, I focused on five areas. I focused on my spiritual help, my mental help, my physical help, my financial help, and growth and goals.

And I said every podcast would fit into at least one, if not more, of those basic areas.

So today is definitely following under financial health and how to understand where we're putting our money, what kind of accounts are out there, and what we can do with them, okay?

Because the biggest part of winning with money is definitely living beneath your means, right? Spending less than what you make, you gotta start saving money, that's how you win with money, that's the first step.

It sounds way easier than it actually is to do. The reality is hard, I get that. But it's also important to know then what type of account you're putting your money in.

And if maybe it's time for you to open a different type of account than what you have, maybe you could benefit from a higher interest rate on your money or something like that. But you don't know until we sit down and talk about it.

I have a background, I worked with a credit union, I understand I'm not an expert, there are definitely people who know more, but let's just go over some really basic things about different financial accounts that you may have, okay?

So, the first four we're going to talk about are accounts you might open at your credit union or your bank, all right? And number one, I hope everybody listening has this, and that's just a checking account. So that's the easiest one to explain.

This is your primary account where your income gets deposited into this account, and then you probably have a debit card. We don't really write checks that often anymore. You have a debit card, and that's how you spend the money, right?

Sometimes you might go to an ATM, make a cash withdrawal, and spend the cash. But this is the account you use for your day-to-day purchases, and it is called a checking account. Pretty self-explanatory.

No need to go into that any further. The second most common type of account, and I hope you have this one too, is a savings account. Now, your typical savings account isn't going to have a very high interest rate.

It's going to be a margin of a percentage point. It's a very low interest rate, but it's a good way for you to set your money aside. It's a visual, I guess, probably reminder.

And when you spend your debit card, it doesn't come out of your savings account. It's a way to segment money, move it over and say, I'm not touching this except for emergencies.

A lot of banking institutions really want you to link your savings account to your checking account.

Because if you overdraft your checking account, if you go to the grocery store, and your groceries are $7 more than what's in your account, it'll just pull that extra money out of your savings account.

And that, if you have it set up that way, can help you avoid the fees that they charge you if you don't have it linked in a place to pull that money from. But hopefully, you are not making overdraft charges. You're not in that position.

You're doing good. You're living beneath your means, and you have a good margin there, and you're not spending down to your last penny. But a savings account, like I said, you're gonna have a very, very small interest rate, right?

I mean, maybe a penny is what you get deposited into your account once a month, a really, really small, small amount. But don't forsake small things. This is where we start.

We all need a savings account. And this is where you can put money, like I said, to set it aside for a rainy day. You can move money from your savings account to your checking account easily on your banking app or from your bank's website.

You can move that money around as you need it. You can move money from your checking to your savings. When you get paid, I'm setting aside money for savings, pay myself first.

But when you go to spend your savings, it's really easy to move it back to your checking, okay? Generally, there are not limits on the amount that you can withdraw from your, just a traditional savings account.

So these are good basic accounts to have. We understand them. All right, two other accounts that you can open at your bank or your credit union.

One is called a money market account. Now, this account also comes under many, many different names. Banks and credit unions like to market their accounts to something special, so they'll find a special name, a prestige account, this or that.

But when you read the fine print and you read the details about it, it's really clear this is a money market account. Some of the overarching features, every bank is different, every institution is different.

But some overarching features of a money market account is there is a higher threshold to open the account. You have to have more money. So you have to put at least maybe $5,000 of a deposit into the account to open it.

The positive is that you get a little bit higher interest rate. And your interest rate will change based on the amount that you carry in that account. So if you have $5,000 in that account, you're going to get one interest rate.

But if you had $50,000 in that account, you might get a little bit higher interest rate. All right? So you're going to get a higher interest rate, but it requires a larger deposit and a larger, you know, average daily balance.

So you can't put the money in and then take it right back out. It's got to stay there. They care what your daily balance is, on average, over the month.

Did it stay at $5,000? Did it stay at $10,000? Okay?

So higher interest rate. The other problem, not problem, but thing you need to be aware of with a money account or a money market account is generally your withdraws are limited. Okay?

So a traditional savings account, you can move money back and forth all around how you need to.

You can make deposits into a money market account, but when you move money from that money market account into your checking account, let's say you've got a chunk of money that you've set aside to buy a new washer and dryer or put down on a car or

something like that, when you go to spend it, you can move it to your checking account, but you can only do so many withdrawals generally in a month. Now, like I said, every institution has different details about what they allow, how many

withdrawals you can make, how often, things like that. But generally speaking, with a money market account, you get a higher interest rate, but you have to keep a larger amount of cash in that account, and you're limited on the withdrawals.

The advantage is you get a higher interest rate. Okay? So, but you can't mess with that money.

So, if something were to happen, let's say you were to sell a vehicle, you were to come into a little bit of cash, you could say, I'm going to just park it in a money market account and let it build for a little while while I decide what to do.

Or, I've sold this car, I've sold this thing, and now I'm going to set my money here until I put it towards the next thing. I buy the next car or whatever. That's a thought, a possibility.

If as you save money in your savings account, once it grows to $10,000, $15,000 in your traditional savings account, maybe you want to take part of it and move it to a money market account so it's growing at a little higher rate.

If you think about it, a traditional savings account, you're making part of a percentage, like fractions. You're not making enough money to keep up with inflation. Parking your money in a savings account is a tool.

It's not a way to make money. It's a tool that you have money that you can access in case of emergency. So you need money in a savings account that you can access quickly.

But it's not where you want to park the majority of your money. And as you accumulate money, this isn't where you want it to stay. So the next step could possibly be a money market account.

Or the fourth type of account you can open in a bank or credit union is a CD. CDs also have a higher interest rate. They're a little bit different.

It's a certificate of deposit. And they're set up on different tables. So you might put a certain amount of money in.

Once again, they generally have a minimum required deposit, $1,000 or $5,000. And you have to leave that money in there for a set period of time. So I've had a five month CD.

That's the shortest CD I've had. But they can go up to five years or more. But months are kind of common.

I've seen five months, six months, seven months, 12 months, 18 months, two years. Those types of things are really common. So once again, let's say you sold a car, or you did something, you came into a little bit of money.

Another option would be you could open a CD, you would park your money there. And you could tell based on how long you were going to let it stay, what your interest rate would be. Okay?

Now, which is better, a money market account or a CD? That's a good question. And it totally depends.

It depends on how you're going to use that money.

So if you are in the process of looking for another vehicle, and you know you're going to take that money and turn around and purchase something else with it, a money market account could be better because you have easier access to that money.

When you put it in a CD, it's locked away for whatever the term is. 12 months, 18 months, 7 months, whatever.

But the other thing you want to compare, if you just say, you know what, I know I'm not going to touch this money for a year, compare the interest rates. And this is an ever-changing landscape. So you got to stay on top of it.

So I sold something, I had a little bit of money that I wanted to put into a money market account. Or a CD. And I looked at the interest rates at the time, and I opened a CD, okay?

Now, as I said, I worked for a credit union, and what my job was, was to help make the promotions. So when we would sometimes promote a very specific type of CD, we would promote a seven-month CD.

And if you put a certain amount in, that CD, you got a really good interest rate. And sometimes that interest rate, when we ran the promo, was way better than the three-year CD.

You put money in and don't touch it for three years, you don't get near as good of a rate as what that promotion was, okay? So look at the promotion. So I put it in a much shorter CD because I got a way better rate.

So there is a table, and it shows you everything. And these change, okay?

The bank updates the rate, just like you hear about the Federal Reserve, and they talk about the interest rates, and you know that affects your mortgage interest rate if you were looking to purchase a house, right?

So when you apply for a mortgage, you get a certain rate. And when they talk about the feds, whether they're going to cut rates or hike rates, you kind of hear that in financial news sectors, it kind of comes up.

Well, all those way those rates are done, that trickles down, and it can affect the rate on a CD or a money market account. So keep your eye on it.

So when I, as an example, came into a little bit of money, I sold something, I had some money that I didn't want to spend immediately, I first put it into a CD.

And when that CD came up for renewal, I put it into another CD, and I kept an eye on the rates for the CDs.

Well, when it was time to renew for the third time, and I looked at the rates, they had gone down so much, and I'm like, I'm barely, I mean, I'm not keeping up with inflation here, you know, this is bad.

And I looked at the money market account, and I was doing better to move the money when the CD matured over to a money market account. It just depends, it depends on how quickly you need to get to that money, how accessible it needs to be.

And then the rates change a lot. Okay. And when you're looking for this type of an account, you can open these types of account online.

You can type in, what is the best interest rate for a CD? What's the best interest rate for a money market account? And you could probably open an account online.

All right. There's a lot of places that offer that, that are just online banking institutions. I could have gotten a better rate going that route, but I felt more comfortable going to my local bank, sitting across the desk from somebody.

I could look in the eye, and I just felt better about that. Everybody is different. I like to know that when I needed my money, I could go talk to somebody, and it was there, I could move it around.

What I sacrificed was a little bit of a higher interest rate that I probably could have gotten online. So be aware of that. You can go to your bank, but you can also go online and shop for a really good rate there as well.

Okay? And do compare the rates. What type of rate are you getting?

And they can change kind of quickly. The rate market has been all over the place in the last couple of years. So I can't tell you definitively, put your money in a CD, you're going to make more.

Not necessarily, it just depends. So get on your bank's website, pull up the app, and look for the rate chart. And it has it all listed.

Go through those charts, go through that fine print. They have to update it regularly. Okay?

So it will change. It is subject to change. But for the moment, you're going to make the deposit, and for the term of what you are doing, get the best rate possible.

Okay? And sometimes that is not the longest CD term or whatever. Look at if there's a promotion going on.

That's the one you want to go with, with the highest rate of return, the highest interest rate. Okay? So those are four types of accounts you can open at your bank.

So once your savings account grows to the point that you need to start moving some money somewhere else, you know, they say you need six to 12 months of living expenses set aside.

Well, I would keep five, ten, $20,000 in a traditional checking account, maybe. But beyond that, I would try to start stocking it away in a money market or a CD, where it can gain a little bit higher rate of return. All right?

Now let's talk about retirement accounts. And this account, you probably have, and it's a 401k. A lot of people have a 401k.

They're pretty common. And you talk about them a lot. You get a 401k from your employer.

Your employer offers it. It's generally one of the benefits. Most employers match the 401k contribution.

So let's say you put a certain amount in your 401k every month. They deduct it, you know, just out of your paycheck, right? And move it to your 401k.

The employer will match it up to a certain percentage of your salary, like 4%, 5%, something like that. We will match what you put in.

So if you only put in 4% of your salary, they'll only put in 4% of your salary, 2%, 3%, whatever, up to whatever the limit is. That is free money. Please take it.

If you work for an employer that does 401k matching, please max that out, okay? That is free money, 100% do that. There are some options within your 401k.

You generally have a little bit of ability to change and tweak it. You get into the program, they'll give you access, and you can say how you want to do it. One of the options may be, not all employers do this, but you could do a Roth IRA.

We're going to be talking about Roth in just a minute. But if that is an option, I would definitely recommend you putting as much of your contribution to a Roth as you can, and we'll talk about that in a minute.

But when you get into the portal, when you get access to your 401k, you can tweak it within certain parameters, different types of things. You have a little bit of an ability to make certain choices with how your money is being invested.

If Roth is an option, I highly recommend that you choose that. Okay, so that's if your employer offers that as an option.

Now, some employers, like if you work for the federal government, there's a lot of people, they're a large employer, you might have something called a TSP.

There are certain groups and organizations that don't go the 401k route, they go a different route, but it's very, very similar. You have an employer-sponsored retirement account.

401k is the most common, but there are others, like I said, government employees, and government employees are a pretty large chunk, you know, that's a decent size percentage of the working population. They have something called a TSP.

If your employer offers a retirement plan, please, if they match contributions, that's free money to you, max out, whatever it is. If it's 5%, put in 5%. If it's 4%, put in 4%.

But max out, at the very least, the contribution that they will match as an employer. Now, I have worked at companies that offered a 401k. There was one company that offered a 401k, but they did not match.

They just gave you the vehicle to save the money yourself, but they didn't offer any sort of matching. But the majority of jobs I've had, the employer offered 401k matching. Okay, so that's the 401k.

What's an IRA? An IRA is an individual retirement account. You can open that up yourself, okay?

And when you put money into an IRA, it is tax deductible. So just like often with a 401k, if you put money into a 401k, most of the time, with the exception of a Roth, the money is pre-tax dollars.

So you don't pay taxes on the majority of 401k contributions, you don't pay taxes on IRA contributions, individual retirement accounts. So the money grows and it's tax-deferred, and you don't pay taxes on that money until you withdraw it. Okay?

So an IRA could be if you don't have access to an employer that offers a 401k. Sometimes small employers don't have the ability to offer a 401k.

Maybe there is a grandchild or somebody in your family, and you want to start, you want to open an IRA, an individual retirement account for them, and start contributions. Now, they have to be an adult.

They have to, you have to make money to put money in an IRA. If you don't have a taxable income, you can't put money into an IRA. So you can't do this for a young child who isn't working.

But there are a number of ways that an IRA is really a useful tool. A lot of people have 401k, so that's kind of the default, I think. But let's not forsake the people who work and don't have access to a 401k or an employer backed retirement account.

So you could open up an IRA on your own. The next type of account that's a retirement account is a Roth IRA. Now, I really like the Roth IRA.

There are contribution limits. So if you're 401k, you can move money to a Roth. Generally, it's like, there are income limits and contribution limits.

It tends to be around $5,000 a year on average. But if you're older, you can contribute more, the different things change. But you can't contribute that much to a Roth IRA.

What is good about a Roth IRA is you pay taxes on the money, okay? It is not tax deferred. And the reason that's a good thing is you're investing that money and you've already paid taxes on it.

So let's say you earn $100, and you go ahead and you've paid your taxes on it. So it's after tax money. You put $100 into an account when you're 20 years old.

When you get to 65 and you retire, you could pull that money out. Now, how much has that money grown? Let's say by the time you're 65, it's turned into $750.

I don't know, I'm just pulling numbers out right now. You don't owe taxes on that, because you paid taxes on it when it was just $100, okay? That's really smart.

So it grows, and no matter how much it grows, you don't owe taxes on the growth, because you paid taxes before you put it in. When you don't pay taxes before you put it in, it's tax-deferred, that means you pay taxes when you take it out.

So a lot of people do what they're told, they start stocking money away in their 401k. All right? So you put money in, you put money in, you save, you save, you're doing so good, but you've not paid taxes on that money.

When you hit 75, you are required by law, just like taxes, you're required to pay taxes, you are required to start withdrawing money from that IRA or 401k. You can't let it, just sit there and let your kids inherit it.

You can't just let it sit there and take out money when you want to. They have a formula, and it's based on a percentage and your age that you have to take a certain amount out. And sometimes those mandatory distributions are huge.

And this is why this can be a problem. When you hit retirement, most people's health insurance is Medicare. Medicare premiums are based on your income, okay?

So, if suddenly you have to take out a huge chunk of your 401k money that you set aside when you hit 75, well, what if you have a pension and you have social security? So, you got a certain amount, that's good.

But then you have to take out 100,000 from your 401k, that's going to make your income shoot through the roof. You're going to have to pay taxes on that, because you didn't pay taxes when you put it in, you got to pay taxes when you withdraw it.

So, you're going to owe taxes on it, and because it's taxable income, it's going to count towards your income that decides what your Medicare premium is. And Medicare premiums can skyrocket.

I mean, they can cripple people with how outrageously high they can go. So, as you look towards estate planning and how it's going to be when you retire, figuring out this tax conundrum is a big deal.

I am by no means an expert, but I do know that as much as you can to rob IRA, do that, because then it grows tax-free. And when you go to retire, you're not paying taxes on money that you didn't pay taxes on back then.

You're saving pennies today and paying thousands tomorrow. A Roth IRA, you're paying pennies today and saving thousands tomorrow. Okay?

So just be aware of that when people talk. You hear the term IRA. You hear the term Roth IRA, 401k.

Now you have a grid for what those are and how they affect you, not only today, because you're right, you will save a little bit of money if you defer those taxes today. Yeah, you save some money, you put it in before taxes.

But when you go to withdraw it, the government is going to get their share today or tomorrow, one way or another, they're going to get their share on those taxes.

And there is something called a Roth backdoor conversion, where you can convert part of a traditional IRA or some 401k money to a Roth IRA, that is outside those minimum requirements. Like you can only do $5,000 or whatever annually per person.

But you can do much more with a backdoor conversion. You would need somebody to help you with that. You need a financial advisor who can help explain that to you and fill out the paperwork and do that.

If you have questions about that, you really, really, really need to talk to a financial advisor. I just want to make you aware that you're going to pay taxes on these retirement accounts either upfront or in the future.

And having a clear idea of what to expect is important. Because I have heard stories of people who saved their whole life and were so proud of how much they had saved.

And they were shocked about what taxes they owed then in retirement, and how much that affected them and threw them off balance. Okay?

So just be aware of that when it comes to retirement accounts, because these accounts are meant for your later life. They're meant to protect you and give you an income when you no longer can work.

But if you don't understand how they're going to work and the way the taxes are going to affect you, and what mandatory minimum withdraws are required, if you don't understand that, you could get to your later years and be surprised.

So just know a little bit about what to expect. Okay? So that's retirement accounts.

Let's talk about investment accounts. I hope that you can invest, and sometimes your investment account is basically your 401k. That's how you invest, and I understand that.

But let's just kind of break it down so you're aware. So you can have a brokerage account, and a brokerage account, you could open online, right? So there are lots of online ways to open, and you can like buy and sell stocks, stuff like that, right?

Or you could go to a person, and you could deal with them in there. You could have a brokerage account with a financial advisor. So what does a brokerage account cover?

Well, typically, you can buy and sell stocks, bonds, ETFs, mutual funds, things like that. So we know what stocks are, right? We've all heard of stocks.

That's when you have a share or equity of a company, right? The company has a public offering, they have stock. You can buy a piece of Coca-Cola, and as the company does good and the stock goes up, the stock you bought raises and goes up in price.

So your 401k could have all these types of things wrapped up in it, okay? Bonds, that's a loan from an investor to a borrower.

A lot of times, bonds are from the government, but you can have, definitely companies can issue bonds, and that's when they have something they want to do. And so they issue a bond.

You, as the investor, could purchase that bond, and it's set for a term, an amount of time. In five years, we will pay it back at this interest rate.

So there's different terms, different lengths of time, maybe, different percentage rates, but that's a bond, okay? ETF, that sounds weird. That's another one of those weird acronyms.

What are you talking about? That's an exchange traded fund. So the stock exchange, right?

It's an exchange traded fund. And that can hold a collection of different assets. So it can be stocks, bonds, commodities, things like that in a group.

That's an exchange traded fund, ETF, okay? Mutual funds, that's when a group of people, and that can be all over, you can buy into a mutual fund. And it's a diversified collection of securities like stocks and bonds, okay?

So a brokerage account is that this money that you put in here, when you withdraw it, so you put your money in the stock market, just for an example, when you sell it, if you sell it at a profit, you're subject to capital gains, okay?

And that's the type of tax that you have to pay on the profit you make when you sell your stock.

Just so you're aware, if you have a brokerage account, somebody is going to, it has to be filed with the government, just like you get like a 1099, a W-2, you will get a special tax document in the mail if you have capital gains.

So if you sell something for a profit, that's capital gains, and you owe taxes on a portion of that. Okay, what other type of investment account? Well, you could have an HSA.

Once again, employers offer HSA. It's a health savings account, and you can use it for a lot of things. It's really good if you have high deductible insurance.

If you know you're going to be spending money on medical things, you can set money aside in your health savings account, and this is something you don't have to pay taxes on. So let's say you're in the 18% tax bracket, okay?

So $0.18 out of every dollar goes to taxes. But if you have a health savings account, this money is put in before taxes, so you don't have to pay taxes on it.

So when you go to the doctor and you pay your copay, or you buy your prescriptions that you know you've got it, you know you have certain prescriptions, or your kid's gonna need orthodontics, you can buy all that, you can set the money aside in the

health savings account, and then when you go to spend it, you didn't have to pay taxes on that. So that's a neat thing, definitely.

If you have that offered to you as a benefit, please look into it, read up on it, understand the advantages, and see if it's right for you, all right? Now we're going to talk about a few other accounts quickly.

You could have, and these are like kind of credit type accounts, you could have a credit card. So that's probably a very common one, you may have a credit card.

A credit card is a revolving line of credit, so the people who issue you that card might say, you have a credit limit of $1,000. So you can put that card down again and again and again until you hit your limit of $1,000 that you spent.

If you don't pay it in full every month, you get charged interest, and it's generally really high. So if you're gonna have a credit card, I suggest you pay it off every month.

What I did to build my credit, because my credit score was pretty low, I got a credit card, and I just put gas for my car on it. And I felt like it offered me a layer of security. My account had been hacked really bad.

And when I was dealing with the bank about it, they told me it could have been a skimmer that they put those card skimmers at a gas station. So I got a credit card, and I only got gas with a credit card.

That way if it got messed up, my other account was okay. I had money for gas, so every time I bought gas, I went ahead and paid off the gas that I had just purchased from my checking account. But it helped me build my credit slowly.

If you get a credit card, be careful with it. If you don't trust yourself, don't get a credit card. Your credit score doesn't need it that bad.

Credit cards can be a way to build your credit, but only if you're smart, okay? It can be a slippery slope. And if you're not self-disciplined, it may not be the method for you.

If you're self-disciplined, and you can follow the rules you set for yourself, you can get some neat rewards, you can build your credit, it can be good. That's credit cards. What's another type of a credit account?

You can get a personal loan. You may go to the bank. You may say, I'm gonna buy a used car for $5,000.

I need to borrow the money. So with that, that is not a revolving line of credit. They give you the exact amount you apply for, and then you are set up on a payment plan for a certain term, like three to five years.

In three years, it will be paid off. In five years, it will be paid off, and you pay payments every month. You can have a mortgage account.

That's a thing that a lot of people have. And if you are unfamiliar with the way mortgages work, maybe you were married, and your husband always took care of it, and now you're looking to buy a house. So, mortgage accounts are unique.

Not everybody knows this going into it. So, the first time you get a mortgage, you need to know that your monthly payment includes four expenses, okay? It doesn't just include principal.

It doesn't just include principal and interest. It includes principal, interest, taxes, and insurance. So, the mortgage company wants to make sure your house isn't lost to a fire.

If your house burned down, you might quit paying your mortgage because you weren't living there anymore.

Or if you didn't pay your taxes and your house got sold on the courthouse steps at an auction, that would jeopardize the person who holds that mortgage, who put the money down for you to be able to purchase your house, right?

So, they ensure that those things are covered by paying for them themselves. Of course, they charge you for that. And that money goes into an escrow account.

So, when you make your monthly payment, a portion of it goes to the principle of your loan. A portion of it goes to interest.

And even though taxes are only due once a year, if your taxes are $1,200, they add on an extra $100 every month to your mortgage, and they put that $100 aside every month.

So, when the tax bill comes, and it will go to your mortgage company, it'll go to you too, but it goes to your mortgage company, they have the money in your escrow account to pay off your taxes. And the same thing with insurance.

They divide it out by 12 months, and that additional amount of whatever your homeowner's insurance is gonna cost, then they pay it when it's due, okay?

So, if you are not familiar with a mortgage, that's something you need to know what you're paying, okay? And so, if you divide it out and say, well, if I got a $100,000 mortgage, this should be my payment.

You may not be including the escrow account, which will cover your taxes and your homeowner's insurance. So, some people get thrown off there. That is another kind of account.

The last type of account that you can get for credit is a home equity line of credit. A lot of people talk about a HELOC, and that is just home equity line of credit.

So, if you bought a house 10 years ago, and it has appreciated in value, let's say you bought it, it was $100,000, using nice round numbers, and today, it's worth $200,000. So, you have $100,000 extra dollars in equity.

You don't want to move, but your house is worth more than you owe on it, right? And in that situation where the value of the home is worth more than what you owe on the home, that is called equity. I have this much equity.

And so, if you were to sell your house, you could bank money. But what if you don't want to sell? What if you're happy where you live, you don't want to sell, but you have this equity and you would like to tap into it?

That's a home equity line of credit. You could go to your bank. A lot of different institutions offer this type of loan, and it is tied to the equity in your home.

So, that is another type of account you can get. Generally, it's a revolving line of credit, very similar to a credit card, and you pay it off. It is directly tied to the equity in your house.

Okay? Those are some financial accounts. We kind of went over, it feels like a lot, but we didn't even scratch the surface.

There are so many more, but these are just, I wanted to go over some really common types of accounts that you either have, you've heard of, that might be beneficial for you to open up, just to give you a grid.

So you could start saying, okay, where do I learn more about this or that? This one sounds like that could be good for me. I hope it was beneficial to you.

I really do. If you have any questions, you can reach out to me. You can find me online, www.workingonamazing.com.

You can find me on social media. I'm on most social media platforms, but I do hang out on Facebook the most. And that's just a page, Working on Amazing.

You can drop me a line and messenger. If you have questions about financial accounts, I am not an expert. I highly recommend that you talk to a financial expert.

But if you're just balancing ideas around, or you had a really cool account that worked really well for you, I would love, love, love to hear from you. I feel like building financial wealth is so doable for everybody.

We've just got to have a good foundation. We've got to learn to live beneath our means, and we've got to understand it. We've got to understand these basic building blocks.

And they don't really always teach it in school. So I think it's important just to start a conversation and talk about it. I so appreciate you joining me today.

I look forward to talking to you next time. Bye.