How to use multiple Bank accounts

Most of us are used to only having two accounts in our banks. Primary checking and savings accounts. The reasoning is that we only know how to pay our bills and expenses with our checking accounts and put money in our savings accounts for a rainy day. In addition, many of us don’t know what an emergency fund or investment account is, let alone how to add them to a budget plan.

Why multiple accounts?

Having multiple accounts allows you to have better control of your money. It also lets you set money goals, tracks where your money is going better, and, most importantly, help you plan for significant expenses or purchases ahead of time. You don’t have to worry about trying to come up with the money all at once.

Example: Let’s say you want to put money aside for a vehicle. Instead of having a savings account that you put money into to save for everything, you can open up an account to save money for a Vehicle.

This gives you more control over how much you need to save to reach that goal. You can do this in two different ways. For example, you can set a price for how much you want to spend on a vehicle or budget for a down payment.

You take either number and finger out how much you can place into the account each month and how long it will take to reach your goal.

Now you can have a set amount of money going to your vehicle account and the rest to your checking and savings accounts. So if you need to take from your savings, you can do so without taking out money from your vehicle account.

How many accounts should you have?

Will the answer to that is up to you? You should have accounts that reflect your goals and what you use your money for. Don’t have multiple accounts open that you are not using or if having multiple accounts is overwhelming for you.

I personally have four accounts that I use at this point. One checking (used to pay all my bills), One regular savings account (for monthly savings), One emergency fund (with 6 months to a year’s worth of funds), and One investment account (for my investments).

My checking account and investments account filter money to other accounts. For example, the checking account sends money to my bills and other accounts due to autosaving’s.

My investment account sends money to my other investment account, like Acorn, Robinhood, and Coinbase.

Everything is auto-set, so I don’t have to move money around monthly. Instead, it automatically goes into the accounts when it’s set for. This makes things very easy for me and frees up my time to do other things.

This is what works for me. However, everyone and their household have different needs and want. With this being said, some people have way more accounts than others. I have heard of people having up to 11 accounts.

Type of accounts

The type of accounts you can have is also up to you and your household. For example, you can have accounts based on your goals, for instance, if you want to own a home. In addition, you can have accounts based on your household needs, for example, if you’re going to rem0dle your kitchen.

If you are a business owner, you want to have a business account that is separate from your personal account. I have heard of people having funds for their kid allowance or school sports dues.

The following is a list of other types of accounts

Christmas fund

Vacation account

Back-to-school funds

Home projects account

Car maintenance

Health account (money you put aside for medication, hospital bills, or out-of-pocket costs)

Wedding

House maintenance account

Her account (money that the wife set aside for her)

His account (money that the husband set aside for him)

Gift account (money that you set aside for gifts)

As you can see, you can have an account for whatever you want. Yet you should really think about the account that you want to have. The goal is for the money in the account to be used for the purpose that you have set. It is not used for you to take from one account to another. If you end up doing this, you don’t need multiple accounts.

Temporary/ Long term accounts

Another key point to having multiple accounts has temporary and long-term accounts.

My accounts are all long-term, but that works for me. You can have either or both if that is what suits you.

Long-term accounts include checking, savings, emergency funds, and business accounts.

Temporary accounts are vacation, weddings, downpayment for a home, kids’ school supplies, etc.

Although saving for your newborn’s college fund is putting money aside for a long time, it is not a long-term investment. Once the child is off to college, the fund ends.

Yet home maintenance is a long-term account. So you can keep money-saving in this account for as long as you can to help with any fixing or replacing that you may need to do on your home.

Tip- Google the home maintenance chart and keep it in a home management folder or binder. This chart tells you when everything in your home should be replaced (it gives you the number of years everything lasted). Next to each item, write down a few prices, like how much it would cost if you bought brand new and how much it would cost if you bought it used. How much it would cost if you paid a pro to replace it and how much it would cost if you replaced or DIY it.

How much should you have in each account?

Once again, this is up to you. How much you put into your accounts is based on a few things. What do you have the account for, how much income do you have, and how long are you saving.

If you are putting money aside for an emergency fund, you need at least 6 months to a year worth of your total monthly bills and expenses. Know this is the minimum amount you can have a few years put aside if you like.

If you are putting money aside to pay for your kid’s school supplies or sports dues for the following when Than, you would get a list of all the items you will need (if it’s for school clothes, then you need to set a budget of what you want to spend) and the total cost (for sports dues).

Next, you will figure out how much you will set aside for the month and how long you have to pay the money (or how long you have till school starts or the sports season begins). So now you just place the money into the account and tell it’s time to pay it off.

Even if you are just a few dollars short, at least you have most of the money, and you may do some volunteering for the rest or just have one more check.

Budget

The last thing that you have to remember is that you have to have a budget. You need a system that helps you keep track of your accounts. You need to know how much you need to reach your goals and how much money is going in and out of your account. If you have enough to put the money into the account.

There is no way to manage multiple accounts without a budget system that works for your wants and needs.

Remember to use all the tools that you can. You don’t want to be overwhelmed with all your accounts. This is a way for you to manage your money easier and help you plan ahead. These are good habits, so they should not be a problem. If they are, you can close the accounts and return to having checking and savings accounts.

Well, that’s all I have for today; I hope this helps you on your journey.

Thank you for reading Everything Frugal.

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