Organizing Your Money with Multiple Bank Accounts

The five accounts every family should have to help save you from financial stress.


Managing finances is complicated enough for one person. When you become an adult with a family, the difficulties increase exponentially, which can lead to stress and other potential problems at home. Save yourself and your family woe by organizing your money into five distinct bank accounts.

1. Direct Deposit Savings

This is a joint account into which you and your significant other — you guessed it — directly deposit your main source of income into. This is your harbor fund from which you transfer money to all the following accounts. The reason this is a savings account, rather than a checking, is multi-fold. It’s a way to pay yourself first. Sometimes people lose their will when they force themselves to transfer money to a savings account. This way, your savings is passive and automated. Second, interest will accrue in a savings account over time, so your income will be compounded. Finally, if you use this account as advised, no one except yourself and your employer will have this account information. Therefore, the chance of a security breach of your main fund is very slim.

2. Bill Pay Checking

From your base savings account, transfer enough money into this account each month to cover your bills. This includes cell phone, cable, utilities, gym membership — anything that is the same or about the same each month. Because energy costs can vary monthly, make sure to always include a buffer in your budget by transferring a little extra than anticipated each month. That way, you don’t overdraft your account and defeat the purpose of all this account organization. From there, set up automatic bill pay either through your creditor or, more safely and systematic, with your financial institution’s website. Schedule your payments to be processed a few days before their due dates to account for any human or computer errors. Everything should be able to be automated, however, it is a good idea to keep checks and a debit card for this account at home in a safe just in case.

3. Emergency Savings

Schedule recurring internal transfers from your base savings account to this one in sizeable, yet manageable increments only until your goal amount of savings is met. Experts recommend keeping anywhere from two to six months of income or expenses in savings at all times in case unexpected circumstances arise. You want to create this account quickly, but not so much that it stretches you too thin. Again, the reason your emergency-only fund is a savings account is because it will gain interest over time. Make sure this account is full before doing any type of investing with your overflow money. Also, once your goal amount is met, it may be a good idea to place the money into a no-load mutual fund. There are no fees involved and the risk is small. It will outpace your savings’ interest as far as returns go, but with less liquidity. Money in a mutual fund could take up to a week to access, so weigh the pros and cons to decide for yourself.

4. General Use Checking

With this account, you have some options. It could be a fund for every day expenses, such as gasoline and groceries. Again, you will use an automatic internal transfer from your base savings, and remember to give yourself a bit of a cushion just in case your expenses vary. You could also open two individual general use accounts — one for you and one for your spouse — for use as a slush fund, or a personal allowance. This money would go toward your hobbies, eating out with friends, and other secondary purchases. The purpose of the general checking account is to help you discern between what expenses are vital and what are incidental.

5. HSA (Health Savings Account)

This is a tax-free savings account built specifically to hold money to pay for any kind of medically related expense, very similar to a flexible spending account available through many health insurance plans. With this account, which must be paired with an appropriate type of high-deductible health insurance, you get a debit card that you can use at pharmacies, doctors’ offices, hospitals and other approved facilities for medically-necessary expenses. By having a HSA, you won’t have to dip into your regular or emergency savings, or incidental funds, to cover medical emergencies. It’s a practical solution for affordable healthcare, as you are able to put in pre-tax money and you can even earn interest on funds that aren’t used.
There are further accounts some families may opt to open, as well. Savings accounts for each of the kids or a combined checking for all the kids — that is all up to you and your family. The same goes for a family slush fund savings account. Do you have a dream vacation on which you’d like to embark? Are your children nagging you for a trampoline? This is a way to save up for those types of specific goals.
Once this multi-account system is in place, as long as you maintain the integrity of each account, a budget will inherently form, and you will quickly be able to find the purpose of your dollars.

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