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I remember the very first bank account that I set up. It was right after the County Fair. I was 10. If you aren’t a farm kid, the county fair doesn’t mean much to you, but I was a 4-H kid. I got a “premium” check for entering projects into the fair. Ten year old me was so excited. I had just started my paper route as well so that meant more money for me. I had two of my very first paychecks to take to the bank. My mom took me to the bank to open my very first savings account. I was beaming with pride because I was 10 and I had my very own money to put into savings. This is probably where my love of savings started.
I remember going down to the bank with my money in my hand. The teller took us back into a cubical where my mom wrote down a bunch of information. Then we sat in the cubical for what seemed like forever before they took the money to put into my account! We finally walked out of the bank and I had a savings account. I still have that bank account, but I have quite a few more now than I did then. Now almost all of the banking is online and almost every bank has a phone app! It takes 10-15 minutes to open a bank account online if you have all of your information handy!
Opening a bank account has become drastically easier since I was 10.
Everyone has different accounts that work for them, but these are the 5-7 that I recommend to keeping your money better organized. There are pluses and minuses to different banks. Remember to keep each bank account information accessible, but safe. When you start organizing your money and give each account a specific purpose, you might even find that your money stays in that savings account longer! There are no maximums of the number of bank accounts you can have, but there might be a max number you can have at a single bank. It might be worth asking your bank how many free accounts you can open before being charged fees.
Having multiple different accounts can allow you to keep your money separate and track your goals easier. If you just pile all of your money into once bank account instead of moving it around, it can also make it tempting to spend your emergency fund on a new couch! Unlike opening multiple credit cards, opening different bank accounts won’t affect your credit score. In this post, I will try to explain the use of the account and the type of bank that I keep them at as well. I want to preface this post by saying that this is mainly focused for singles. If you have joint money, you might have a few more accounts than this for separate spending and savings.
Here are the 5-7 bank accounts that I have that I recommend
Where: Local Bank
This is the bank account that I primarily use for my monthly expenses. These are all of the things that it takes to run your home and your life. Things like rent/mortgage, electric and light bills, gym membership, car insurance, and phone bills. This is also where all of my direct deposits go before being divided up.
If you only keep the amount you need for bills each month, it makes it easier to track what has and hasn’t come out of the account as well. I usually leave a $10-15 buffer in this account, but that is definitely a personal preference. I highly recommend having a list of things that come out of this account and checking them off as the auto withdraw has been made.
Where: Local Bank (preferably the same as your bills bank account)
Instead, I use a spending checking account. All of my spending money goes into this account. I use this for irregular expenses like gas, groceries, restaurants, beauty. Cash envelopes don’t seem to work for me, so I use this count in replace of them. Using a checking account for this can also eliminate the craziness of ordering something online if you only have spending cash and then replacing the money in your account.
I deposit a set amount of money into this account each week/paycheck/month and once it is gone, it’s gone. For me, I don’t budget for these categories individually. I try to fill up my gas tank each week when I deposit money into this spending account. From there, I have to pick and choose which things are important for that week. I do allow the money to carry over, so I can save up for purchases that I want if I cut back on other expenses.
Where: A separate, but easily accessible bank. (I use Capital One 360)
Your emergency fund is your main buffer between the unexpected and going back into debt. I wrote a whole blog post about emergency funds. Everyone has a different amount that works for them for this account. It can be dependent on your location, family, job stability, income, wiggle room in your budget, and rent/mortgage. Most people recommend $500 to 3 Months of expenses depending on your job stability.
Having a little rainy day fund can be the most important part of getting started on changing your finances for the better. It can also give you a sense of security when your checking account is looking a little low from a large debt payment.
I use Capital One 360 because it is accessible from my app, but it does take 2-3 days to transfer. This makes it harder to for me to spend my emergency fund on something else when it isn’t an emergency.
Short Term Savings Goals
Where: Local Bank
For me, this is the 3rd bank account that I have at my local bank. This is for sinking funds like home decor, clothing, furniture, and short trips. I keep this one closer to spending accounts because it is things that I am saving up for so I can spend money. You have permission to spend this savings on smaller, planned expenses. Ideally, this are things that take less than 6 months to save up the money.
This account is great for short term sinking funds because once you have hit your savings goal, you can purchase whatever it was you were saving for. I personally keep all of my sinking funds in one account and have an excel tracking sheet that divides up the total into each savings goal. Some people have multiple different accounts for each goal depending on what their goals include.
Long Term Goals
Where: Online High(er) Yield Savings (Ally)
This is a bank account for bigger expenses. This could be a home, a big remodel, a new car, college, or a big vacation. I keep this in a bank account that is a little harder to access because it makes it harder to accidentally spend when you are working towards a goal. Ally now has “envelopes” so you can divide the money in one account into different categories.
This bank account is for those bigger savings goals. I use it for anything that takes more than 6 months to save up the money. This money should ideally only be touched for those specific saving goals.
Bonus: Business Checking and Savings
If you have your own business or even a side hustle that requires you to spend money, I highly recommend keeping everything from that in a separate bank account. Keeping this separate can create a lot more ease when it comes to taxes and business expenses. It can also help show you if you are dipping into personal money for your own business. I am currently working on setting up checking and savings at a different bank for all of my business expenses and income. I haven’t managed my business money as well as my personal money.
Do you have multiple bank accounts to keep your money separate?
No matter how many bank accounts you have, it is important to keep your goals in front of you and keep them organized. I have found that these 5-7 accounts are the best way for me to personally organize my money so I am not tempted to spend money on things that I haven’t planned for. There is still the occasional slip where I just can’t wait to make a purchase and I find myself using my short term savings for things that I am not supposed to. It happens, because I am not perfect.