One of the questions I receive most frequently from new clients is what type of accounts they should open to achieve their goals. Afterall, there are a myriad of accounts to choose from, each with different purposes and features. Utilizing the right types of accounts to hold your cash and investments may have a variety of benefits, including minimizing taxes, easing administrative issues, and growing funds more effectively. This is why understanding the plethora of options available to you is imperative for financial planning.
Below, I outline different types of accounts plus factors Orthodox Jewish families should consider before opening them. The lifestyle for frum families differs from folks in other demographics, and, therefore, the types of accounts frum families prioritize may be different than what is typically recommended. The overview below is a good starting point, but is not an exhaustive list, so please speak to your financial advisor, estate planning attorney, and accountant to get their insights on what approach makes sense for your family.
Checking account: A checking account is a fundamental financial tool for managing everyday expenses and easily accessing your money. The salary for each breadwinner in your house should go into this account, where the funds can be used to pay your bills. It is recommended to have 3 to 6 months’ worth of expense money sitting in your checking account. For folks that are retired, a year or more’s worth of cash sitting in this account is prudent.
Every family needs a checking account and opening one at a large reputable institution is advisable. Stick to the funding guidelines without going overboard. Having too much cash sitting in a checking account is typically a poor decision, as you are losing buying power due to inflation.
Savings Account: A savings account is a type of bank account designed for individuals to store their money and earn interest on their deposits. The percentage of interest earned within a savings account is typically higher than a checking account.
I do not advocate for most families to have a savings account. Funds needed for expenses should be held in a checking account, where they are easily accessible and liquid. Funds being saved for your financial future should be put into a retirement account. Money that you plan to use for more near-term goals, but not daily expenses, should be in a brokerage account and invested according to your goals. Too often, folks will tell me that they have accumulated a large pool of cash sitting in their savings account, which is earning a shvach return and losing buying power due to inflation. There are more constructive ways to save and put this money to work outside a savings account.
Brokerage Account: A brokerage account, or taxable investment account, allows for buying and selling various investments, including stocks, bonds, mutual funds, and exchange traded funds. Alternative investments can also be held in these accounts if desired. A brokerage account can be opened through your financial advisor or the many large online platforms (e.g. Schwab, Fidelity).
There are no inherent tax benefits to utilizing a brokerage account, but they can be useful to save money for a variety of different goals. For example, if you want to do a renovation on your house in a few years, you can use the brokerage account to invest in money market mutual funds, which offer higher yields on your cash than a checking and savings account. If you have a longer-term goal, like saving for Moishe’s Bar Mitzvah in 7 years, you may want to consider investing in stock and bond mutual funds to possibly experience more growth with these funds.
Money in a brokerage account can also be used for longer-term goals, like buying a condo in Miami in 15 years, paying for a chosana in 18 years, or to supplement your retirement savings. There are many different sensible ways to utilize a brokerage account to save for your varied goals.
Retirement Accounts: It is imperative for every family to save for retirement. At some point down the road, everybody wants the option to either retire or cut back on working. Many people may no longer be able to work as they get older due to health concerns. Therefore, saving and investing funds to be able to retire in the future is essential.
Thankfully, there are many ways to save for retirement. The option you choose may depend on your employment situation and tax status. I will highlight just a few options:
IRA: An IRA, or Individual Retirement Account, is a tax-advantaged investment account designed to help people save for retirement. Anyone can open this account as long as you or your spouse has earned income. You can deposit up to $7,000 annually if you are under 50 years old, $8,000 if you are over 50, and have at least that amount of income (2025 numbers). Utilizing a traditional IRA will come with tax deferred growth and potentially a tax deduction, while utilizing a Roth IRA will allow for tax free withdrawal of funds in retirement. There are restrictions based on your level of income and marital status that should be considered before depositing funds in these accounts. Deposits in these accounts can be invested in stocks, bonds, or funds based on your time horizon.
Corporate retirement accounts: Corporate retirement accounts come in many shapes and sizes, including 401(k), 403(b), 457, and SEP. An entire series of articles can be written on these accounts and their various nuances without even scratching the surface. The important thing for readers to understand is that these retirement vehicles make it seamless for employees to save for retirement since the funds typically come right out of your paycheck and are invested automatically. Oftentimes your employer may contribute to your account through a company match.
It’s worth speaking to your Human Resources department or CFO to review your options. I strongly encourage my clients to make the most of these accounts, which means maxing out the full contribution limit ($23,500 in 2025 for a 401(k), if you are under 50 years old) and your employer may contribute a match on top of that. A company retirement plan typically has a list of options in which you can invest. The key is picking investments that are suitable for your time horizon and financial goals.
In my next article I will cover various accounts that many frum families use for their children, trusts, and charitable giving.
