Online brokerage accounts are as foreign to some of us as another country in which we are not fluent in the language – most everywhere for me. The problem is that when it comes to savings for any purpose, the vast majority of us are in a foreign territory. We know we need to save. We know that we need to have something like six months of our salary in savings, or that we need to have at least $1,000 in savings to get us through some emergencies. The bigger problem is that most of us have no idea how much money we need to retire, where we need to put that money or what we need to do with it. We don’t know if we have enough, if we need more, if we can save enough.
We have no idea what online brokerages are, and we have no idea what I’m talking about right now. Welcome to my husband’s daily life, for the record. Online brokerage accounts are great for savings. You can use them to save for retirement, to save for college for the kids or to save for anything you feel is worth saving for. Even if all you want to do is take that unexpected windfall and see if you can invest it into an online brokerage to make a little money on it, it’s fine. It’s your money, and it’s your account; you get to do what you want.
However, we have a few things you need to know first. One thing we hear a lot is that people are unaware that they need so much information when it comes to opening an online brokerage account. It’s not like opening up a new email address or registering for an account with a store where you just need a name and an email address. To expedite the entire process, you’re going to need to have some information on hand or readily available to open your online brokerage account. We know how easy it is to forget doing it if you don’t have this stuff on hand, so we thought we’d make it a bit easier on you.
SSN or Tax ID
Whether you are a business or an individual, you need one or the other. The SEC (Securities and Exchange Commission) likes to be sure that you are providing this information even if you are working with an online brokerage account. The reason is that these brokerages are required to report the income you make to the Internal Revenue Service each year for tax purposes. Not providing this information is not optional. A brokerage that does not ask for it is not one you want to work with.
Why does the online brokerage account you’re opening need to know if you are employed? That’s simple; it needs to know everything. The biggest reason, however, is that this allows the online brokerage to get to know you. This allows them to get to know how much you might be willing to invest in the future, what concepts might work best for financial growth, whether something might work well for you or it will not work at all.
In addition to providing your employment status, you’re going to need to provide your financial information to this account, too. The reason here is that you need to be sure you are able to get what works best for you. This is a financial account, so knowing your financial situation is highly beneficial in this situation, and in so many other situations.
I know you are sitting here thinking that this is an investment account that you are opening up over the internet, but they still need to know this information. There is a very good reason for all of it, too, and it actually has very little to do with you and more to do with the brokerage. You see, even though it’s not a brick and mortar location you’re dealing with, online brokerages still need to comply with SEC and FINRA rules as well as the USA PATRIOT Act. Part of this is to properly identify those who wish to open an account, and part of that is to just abide by the rules and be sure they are not doing illegal business. While the primary job of the online brokerage with which you are working is to make money for you, they also have to protect themselves.
If you are not asked to provide all the above information when it comes to opening up your account with an online brokerage, you’re not working with a reputable company. We all have worries when it comes to doing business online; that’s why we like to be sure you’re doing what needs doing and working with someone reputable.
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