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How many bank accounts do you currently have? One? Two? What if I told you that you should have at least five bank accounts? Would you think I am nuts? Okay, I probably am a tad bit nuts, but I make sense sometimes. All of that aside, if you only have one or two bank accounts, you open yourself up to accidentally spending money that you’ve earmarked for other items. Spreading your money out across different accounts though can not only help you keep things separated but also help you build more than just savings…you’ll build wealth and stay organized as well.
These are by far the only accounts that you could have. It doesn’t include investment accounts. It doesn’t include retirement accounts. I’m not talking about having separate savings accounts for each individual thing that you’re saving for. I personally am of the opinion that having too many accounts only leads to budget confusion. What is budget confusion? My definition is a bit different than others. Budget confusion is where you have too many cooks around the stove. You’ve got so many accounts and so many budgeting apps that everything goes crazy because you can’t keep track. Budget confusion only leads to spending more money than you intended to and less in your savings and other accounts. Eventually this leads to a complete budget failure.
5 Must Have Bank Accounts Every Family Needs
I know that it may seem silly to have three, four or in this case, five bank accounts, but I do it and I recommend it for a reason. It’s easy to spend money when you don’t have it specifically targeted toward something. In other words, if you keep all of your money in one or two accounts and don’t save for targeted expenses, the chances that you’ll spend it on something else are incredibly high. With these 5 bank accounts though, you can target out specifically for 5 major events in your life and not worry that the money will be spend elsewhere.
Checking account – We should all have a basic checking account that takes care of our day to day expenses. Your bills, gas and groceries will all come from this account. It should also be the account where the majority of your paychecks are deposited as well. You’ll also want to look for a checking account that has little to no fees. If your current bank doesn’t offer low fees, you might want to consider moving your accounts since there are quite a few banks or credit unions that will wipe out fees simply for having your paycheck direct deposited.
High Yield Savings Account – Everyone should have a basic savings account to save for things like buying a new home, your next car purchase or even that new outfit that you have your eye on. Regular savings accounts typically have low interest rates and while that isn’t going to make or break you, it will keep you from building a little bit of wealth. Instead of just accepting that lower interest rate, look at a high yield savings account or if you plan on leaving your money sit untouched for a while, a money market account. Both have higher rates meaning your money works just a little bit harder for you than normal. Another thing you’ll want to look at doing is keeping your savings accounts away from your regular bank so that it has to be connected to your checking account as an external account. You will save more money this way. It follows the “out of sight, out of mind” principle when you have to wait 3 days to transfer your cash.
Savings account for your Kids – Parents will want to have a savings account for each one of their children to help them save money that is sent for birthdays and holidays or a percentage of each paycheck once they get a job. You can use this as their college fund or turn it over to them once they graduate. Some families save the money and turn it over to the kid when they graduate college to help them get a start on their own. It’s up to you but your kids money should be separate from yours. Just for clarity, I am not meaning a youth savings account. Those are different and have their place, but in this case I mean an account that your kids know about but have little to no access to. For these types of accounts, you’ll want to either use a money market account that has a higher interest rate or if you’re looking at leaving the funds in there for 6 months or longer without touching them, opening a CD will be a much better option.
Christmas – Christmas shopping can be enough to bust any budget, but if you prepare for that expense over the course of the year, it doesn’t take quite as big of a bite out of things. By having a savings account that is dedicated to Christmas spending only, you’ll be able to take the expense and draw it out over the course of the year. You’ll want to deposit $25 or $50 each paycheck into this account so that by the time you need it for Christmas shopping, you have it. Another way to build your Christmas fund is to do online tasks that earn. I personally add $225/mo to my income every month with just 2 hours of time each day. It comes in handy at Christmas or anytime that you need to stretch your budget.
Emergency – Building your emergency savings is the single most important savings account that you can have. It’s the account that you will use to fund any major (or minor) financial emergencies or things that happen in life that you otherwise wouldn’t be prepared for. You’ll want to start with enough to cover 1 month of expenses and build to three. A lot of people stop at three, but I personally recommend that you have six in case of job loss. Unlike your other savings accounts, you’ll want to keep your emergency funds close to you in case you need quick access. If you do keep them at an external bank, make sure that you have an ATM card (at the very least) so that you can get to the money quickly if you need.
As you build your financial future, you’ll want to take a look at other accounts too that will help you invest your money easily, and help you build wealth so that you can plan for retirement and build your portfolio so that you can eventually be financially secure.