MULTIPLE BANK ACCOUNTS YOU NEED TO HAVE
There are so many ways to organize your money, but this is one of the ways that helped us get out of debt (over $33k in credit card debt) and save money too.
The problem with putting all of your money into one bank account is that it gives you a false sense of having more money than you actually do, which can lead to unnecessary purchases and overspending. Trust me I know first hand.
Multiple bank accounts can be confusing, but with proper planning they can help you get your way out of debt, keep better track of your cash flow, and help you save money so much faster. Even if you don’t enjoy budgeting , you’ll want to plan ahead for these common forgotten budget items.
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Here are the multiple bank accounts you should have if you want to get your finances in order.
EMERGENCY FUND
This bank account is the most important out of all the bank accounts you should have.
When moving from our last home we were hit with the unexpected cost of removing the underground oil tank we didn’t know about, reassessment fees from our condo’s homeowner’s association, a bigger mortgage on our new home, and significantly higher transportation costs.
Had we had an emergency fund with enough money in it to cover even just 3 months of our expenses we would have been able to recover much more quickly. In reality we ended up getting buried by more and more debt as we were trying to just pay our regular monthly bills.
Since we paid off our credit card debt, we have been steadily building up our emergency fund by continuing to sell and side hustle. Once we hit our mark I plan on moving our emergency fund into a bank account that can earn a little interest, but is easy to access.
If you’re still in debt start off by building a small emergency fund of $1,000. You want to have at least a little bit to help you out on a rainy day.
Your goal should be to build an emergency fund with enough money to cover at least 3 to 6 months worth of expenses. Your emergency fund is your buffer in the case of a job loss, emergency home repair, accidents, etc.
We used the money we earned from shopping to pay off our debt faster. Now we use it for vacation.
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Keep it in an account that is accessible, but not too easy to access that you’ll be tempted to use it for anything other than an emergency.
Related posts:
* How to save money while you’re drowning in debt
* Using cash envelope wallets to budget your money
GENERAL SPENDING ACCOUNT
In our checking account we direct deposit enough money to cover our recurring monthly bills.
This bank account covers everything from our phone bill, electric, gas, security system, etc.
Everything that can be is automatically paid online. This ensures everything is paid on time and in full.
This month is our first month implementing the envelope system. Our groceries, entertainment, and a few other categories are paid strictly in cash. That cash comes out of this account. So far it seems like we are spending even less money, but I’ll update you soon.
Money in your spending account is constantly moving in and out. You need enough in it to cover your monthly expenses and a little extra to act as a buffer so you don’t have to fear going in the red.
COLLEGE/KID’S FUND
Before my daughter was even born we started a savings account for her. Once we saved more we transferred the kids’ money into a money market account, which is an online high-yield savings account.
When we were fighting our way to pay off our credit card debt we continued to make our weekly contributions to our kids’ bank account. At one point I did decrease the weekly amount.
I had debated long and hard about using our kids’ money to pay off our debts.
At the time we had enough money to pay off all of our credit card debt, but I refused to touch their money. We did this for two reasons.
#1 Didn’t want to get into the habit of touching that money even though we knew we would pay it back.
#2 Wanted to learn the hard way how best to manage our money and stay out of debt in the future.
There are many options for saving for your kids’ futures. There are 529 plans, Roth IRAs, etc. Each has different tax benefits and restrictions. Research to determine the one that best fits your family’s needs.
VACATION/ENTERTAINMENT
We try to go on vacation at least once a year. Sometimes we just do local road trips and other times we go on cruises.
The amount of money people spend on vacation blows my mind.
We shop around for the best deals, try to go during non peak months, and pay in installments when available.
Put a set amount of money aside into your vacation account each month so that you can afford a trip each year without running the risk of putting yourself into debt.
INVESTMENT/RETIREMENT
My husband and I each have our own retirement accounts through work.
If you are fortunate enough to work for a company that offers a 401k plan with matching do it.
I am in the process of scrounging up some money to start a Roth IRA for my husband and me.
This is a bank account you should have because no one is going to save for yourself better than you. I made the mistake a long time ago saving up money and just letting it sit in a checking account earning nothing in interest or return. Zilch.
Explore your options and don’t be scared. As much as having money siting in a bank account is safe, money left in a savings account doesn’t earn enough to even cover inflation. Let that sad truth sink in.
MORTGAGE/RENT
If you pay rent or have a mortgage, I would recommend having a separate bank account just for this.
Each month we automatically direct deposit enough money from each of our paychecks to cover our monthly payment plus a little extra so that we can make one extra mortgage payment by the end of the year.
This is a known expense and therefore should be automated.
HOLIDAYS/BIRTHDAYS
If you’re a big gift giver then this is an account you need to start now. The holidays are less than 9 months away.
Just because you may wait the last minute to buy gifts doesn’t mean you need to wait until the last minute to pay for them.
Put away just $20 a week and you’ll have $720 by the end of the year. If you spend more, save more.
Earn more money by visiting these posts on:
*Fun money saving coloring page challenge
*Top ways to get cash back and extra savings
Start earning some Amazon gift codes and cash back now. Last year I was able to save up a few hundred dollars by the end of year for gifts.
Another alternative is starting a gift closet. Buy gifts throughout the year when they’re on sale. I’ve done this on and off. It’s great because I don’t have to give myself a headache trying to buy gifts at the last minute.
3 Things You Should Do With Each Bank Account
Name the bank account:
This makes you less likely to take money out for another reason other than what the account was intended. It can also be inspiring to want to save for a goal or special trip.
Automate:
Just try it. You’ll be surprised how fast you save up money. I just increased the amount we are putting into savings and haven’t noticed a difference.
Evaluate:
Periodically review your accounts and adjust the amount you are depositing into each as necessary. Now that our credit card debt it paid we have more money to put into other categories.
These are the 6 bank accounts our family has because they are the categories that are important to us. If you don’t have kids maybe you might have an account for your pets or your yearly golf outings.
Your goal is to create separate bank accounts for specific purposes that you want to save for over a period of time. You don’t want to get hit with paying for them all at once and risk having to go into debt.
Some banks allow you to open one account and divide them into multiple categories so you don’t have to open a bunch of individual accounts.
Most banks will insure up to $250,000 of your money in each account.
If you want to save money you have to tell it where to go.
Happy savings and don’t forget to pin these pins for later!
Why should I have more than one bank account
Ah it is so important to save save save! Even saving $5 a month helps – thank you for sharing!
You bring up such a good point. Even when you’re struggling with debt, trying to save just a little is better than nothing.
I like the idea of money automatically transferring from the main account. It’s nice to be hand’s off at times like that!
Oooh, I need a separate account for vacations/fun, and one for gifts, as you mentioned. This helps, thanks!!
Yes, we just started the vacation fund. Before we just paid with our credit card and struggled to get it all paid in time.
What an awesome post, I learned a lot that I didnt know! Thanks for sharing
That’s great! thank you
Saving is hard! I’m the absolutely worst saver! I definitely need to improve in this area!
Yes it is. My husband is bad too and what helped him was making a money jar with the words “Boat Money” on it. He throws in all his extra bills and change into it and has never taken anything out. Figure out what would motivate you to save.
Love that you’ve got the emergency fund listed first. It’s ALWAYS going to be needed! Great info!
Thank you 🙂 Wish I knew that 5 years ago, but you live you learn.
Great information!
Your advice made me think about how I can allocate my bank accounts more effectively. I’ve recently started paying cash for groceries and a few other non essentials. It does make you think about it more than just handing over your debit card.
Yes, we are still adjusting to paying cash, but it has helped us spend significantly less on groceries this month. Hoping to keep it up.
This is a great idea to have all those separate accounts. I don’t I only have checking and savings.
I know having too many can be daunting for some, but now that I do it I do find I save so much more money, which makes it worth it.
I have heard of having different bank accts for various things- especially when you have a business.
Yes, that’s a good idea. I think if I start making some real money with my blog I’ll add that as another bank account lol
I am not sure if I would want to keep up with this many!! But I can see the value in it for sure.
I know what you mean, but it definitely works for saving. I think some banks let you open up just one account and subdivide it how you want which makes it easy to be all in one place.
These are such great tips! I too agree it is too tempting and gives a false sense of security to have it all visible in one account.
This gave me some great ideas! Thanks
I have most of those bank accounts except the birthday one. That money comes out of our general fund. I think the most important one to start with is the Emergency Fund, then the retirement.
I agree, birthday gifts and parties aren’t a huge expense for us. We have extra money and Amazon codes that we use mainly for that.
What is an Amazon code? I need to know that one as we spend a lot of money at Amazon. LOL
You can earn promo codes by doing surveys or other tasks online. It’s like a gift card you type in.
Yes great reminder. I have the automatic withdrawal from my main account for fun money and it adds up. The other accounts are essential for a complete savings portfolio. I love your laser focus on saving. A gift we can give to ourselves.
Thank you 🙂
Yes, I like having separate accounts for easier tracking.
Me too. I’m still playing around with them now that our credit card debt is paid off. I want to make it easy and efficient.
Wow! What a great idea! We just have three bank accounts, but I like the idea of having one specifically on mortgage/ rent!
Each family is different so some need more accounts than others. Our mortgage account helps us make a minimum of 1 extra mortgage payment a year. This is going to cut off at least 4 years from our 30 year loan.
Thank you for listing all the different kinds of bank accounts you should have. I really want to start saving money, but I really don’t know what kind to get. I think that would be really fun to have a vacation and entertainment account. I would love to be able to save up money I can’t use until the vacation.
You’re welcome. I’d start off with a simple savings account until you can build up enough to do a money market account. They have better interest rates. Just ask your local bank if they offer subdividing of accounts.
My husband and I about a year ago decided to try different bank accounts. We only have 2checking and a savings but it is working for us right now. My light bulb moment in life finding out why we couldn’t save and were overspending is because we didn’t have a goal written out with and end point. So we started making 30/60/90 day goals and now have yearly goals so we have a sense of accomplishment. Also, I didn’t have friends that were budgeting and planning. It’s so important to have a friend who is right where you are. Don’t we all wish we could go back to our 20’s and change our spending habits.
The same with us! I kept thinking this makes no sense, we are just barely paying the bills. Now my husband is on the same page, we automate our savings, and finally investing. So happy for you and all really great tips for people wanting to get out of debt and save. Thanks for sharing!
Not to be a downer but when I read these posts with all these experts who have paid off their debt the reality is their situation is vastly different from mine. First of all you actually have a husband that participates in it with you…I do not have that…my husband couldn’t care less about budgets or paying off debt or anything like that, he doesn’t want to help with anything that pertains to bills, he just spends and expects money to be there and when it’s not he yells at me and when I ask him if he could curb something like eating lunch out every day he tells me he makes the money and he’ll spend it however he wants to which brings me to my next point, most of the people who post these kind of articles are in situations where both parties work and you make incredibly good money…I do not work as I am a stay at home mom which brings me to my next point…a lot of you doing these articles also don’t have kids, therefore you don’t have that huge financial sacrifice…I have two kids and it’s pretty costly at times. So while I can appreciate the articles it’s just not very realistic for my situation…I’m trying very hard to pay off the debt, we want to move out of this dump of a rental we live in but I don’t want to move until most of the debt is gone…and having said that we also have to live to…we do take a couple of vacations a year, we’re not those crazy types that spend a lot on vacations though, don’t get me wrong we spend I just keep it in check …we don’t do much as far as activities go at home so vacations are our luxury…sure I could forego the trips and save that money to pay on the debt but like I said, I really really don’t ever do anything as far as going out…the grocery is about all I do…I don’t drink, smoke or go to bars, I don’t do Starbucks, I don’t wear fancy clothes since I don’t work, I seldom ever wear makeup, I only get my hair cut twice a year and I color my hair myself…I work out at home so there’s no gym fee…it can’t possibly get any more boring than that unless I cancelled the satellite subscription and I’m not gonna do that because like I said, I don’t do anything…tv is all I have. I probably put too much pressure on myself because I’d like the debt to be gone by a certain time and it’s pretty much not going to happen…but I try and I guess that’s all I can do…right?
I agree, no one’s financial situation is the same. Having 2 incomes definitely helps..a lot! Having a husband on board with my money mindset also helps too. I haven’t always made as much as I make now. We have 2 kids (not too expensive yet) and unfortunately still have my husband’s condo mortgages which have very high interest rates (9.5%). We do what we can and I think it’s great that you do take your money to do fun stuff too. I get my haircut using Groupon/trim it myself. Not sure how old your kids are, but are you able to do a side hustle to bring in extra income? I know one woman who works as stay at home mom and makes over $20k a month blogging. Again, no easy task, but perhaps something to consider. I currently make $500 a month working on my own blog on the side. I think the other problem is not having your husband on board. I get he’s the “breadwinner” and therefore feels he can spend how he desires, but he needs to realize you guys are a team. I explain to my husband that if we sacrifice some things now we can have so much more later. Being a SAHM is no easy task, you should be very proud of yourself. Just because you don’t get paid doesn’t mean you aren’t working. Wishing you all the best. I plan on writing a post about ways to get out of debt geared towards SAHM and will use personal anecdotes and quotes from those who have or are currently doing just that. I hope it will be of help to you too.
Normally, I won’t do this but I read your entire comment and feel the need to reply. My wife and I are in the exact same situation as you are. I work while she is a stay at home mom and has been since 2015. We have three children, two of which were enrolled in school, but now they are home with her during this pandemic. We don’t spend a lot on activities but we try to emphasize more on experiences and memories. For example, we don’t have a gym membership so we jog together. The boys don’t like their hair too long so I watched YouTube to learn how to cut their hair. The kids love to watch cartoons but I didn’t want to pay for any streaming services so we asked my in-laws and they gave us their account info to stream from our tv. My wife was the big spender between us both but after years (probably close to 5ish) of drilling financial concepts into her brain, she is finally starting to come around. It wasn’t an easy journey and we are far from perfect financially but man does it feel better than it was before. I’ve tracked OUR net worth since 2013 and it is an empowering to see how far we’ve come. You really don’t feel the effects of bad financial habits in the moment so seeing what it was like back then makes me wonder how we ever survived. I say this all because I am just like you and there are many other people like you in the world. Just know what your ultimate goal is and march toward it with everything in your being. I’ll be honest, I’ve had my fair share of moments where I broke down to my wife but for some reason, and I can’t recall when, it just “clicked” for her. So hang in there and I hope nothing but the best for you. I’ve even started my own website hoping to inspire families like you and me.
Justin, thank you so much for sharing your story. I know it will definitely inspire others in a similar situation. Getting out of debt when one person spends and one person saves has its struggles. My husband and I learned how to communicate and create balance. Now he can spend on what he wants and I can save aggressively like I’ve wanted 😉
My yearly car insurance, road tax, tyre replacement, regular service and unexpected visit to workshop can be expensive. I have a sinking account for that as well.