Everyone starts out with the two basic accounts: a checking and a savings account. For the average person, those are enough to get by in the real world. For others who have a difficult time managing their bills, want to gain control of their finances or wish to save money for a specific purpose, then opening multiple bank accounts is crucial for them.

Having multiple bank accounts keeps you organized, supports your financial goals, and gives you peace of mind. It may sound counterintuitive that more accounts equal being more organized but with enough effort, your financial situation could improve drastically (I’m living proof of it).

Providing for a family of five, with a single income, it felt like money was leaking out of our bank account. After deciding to fully implement this strategy we gained a better idea where our money needed to go instead of hoping our checking account had enough funds.

Rather than operating from one or two bank accounts, try opening these one, two or all seven bank accounts and see how it works for you.

Table Of Contents

• Family Checking
• Irregular Bills
• Emergency Fund
• Retirement Savings
• Big Ticket Items
• Generosity Fund
• Fun Fund
• Bonus Tip: Personalize Your Account

Family Checking

Think of this as your “main bucket” account; the place where all your money from any income sources go to as a starting point. From here, it’ll “pour” or transfer into the other accounts (explained later in detail) and vice versa. The money from this account is for your monthly bills, utilities, budget items, mortgage, and other “everyday” family expenses.

Best Practices For Your Family Checking Account

• All income gets directly deposited here. Almost all banks offer this option.
• Pay all monthly bills from here. Establish auto-pay for your bills to avoid incurring any late fees. If auto-pay isn’t available, use reminders with an online calendar or your phone to notify you when bills are due.
• Store enough money to cover expenses for the month. Don’t leave too much excess in here because you’ll likely spend it.
• Set up auto-transfers to other bank accounts (listed in this post) to simplify sending money to the right places.

Key Tips For Your Family Checking Account

• Keep a little more than a month’s worth of expenses to avoid going “red”.
• Read the fine print. Understand your bank’s requirements like minimum balance and such. You don’t want to fall under this minimum balance and owe the bank each month.
• Many banks will offer a “free checking” account. Don’t settle for an account that charges you a monthly maintenance fee or limits your daily withdrawal amount.
• Consider a bank that offers mobile deposits. It’ll be easier when reallocating your money around to different accounts.
• Be on the lookout for banks with sign up bonuses. While bonus money shouldn’t be your main object, it wouldn’t hurt. But these offers may be location dependent.

This is the main account everyone starts with but it doesn’t have to stop here. Every dollar, or most of them, can begin here but they don’t need to end here.

Irregular Bills

This savings account is for your non-monthly bills. The bills that come infrequently but are easy to anticipate. These bills typically catch people off guard because they don’t properly plan for them. 

Some examples of irregular bills are:

Seasonal

• Car registration/inspection, prescription glasses, sports activities, hobby supplies, kids’ activities, household maintenance

Annual

• CPA preparing taxes, Amazon membership, subscriptions, credit card annual fees, health check-ups, season tickets, vet check-up

Saving for these expenses ahead of time allows your other family accounts to continue growing because you’re not liquidating them. 

Best Practices For Your Irregular Bills Account

• Ensure this money is easily transferable. Keeping your savings and checking accounts at the same bank works best.
• Make one large transfer per month instead of many smaller ones. Banks usually limit you to six monthly transfers before charging you a fee.
• Irregular bills won’t be precisely the same every year. Be ready to adjust your overall number as you progress through the year.

Key Tips For Your Irregular Bills Account

• Review all last year’s expenses. Estimate the annual dollar amount needed to cover all of them. 
• Allocate the proper amount every single month. Figure out the correct allocation dividing the annual amount by 12.
• Know the minimum balance. Your bank of choice may require a low balance or none at all. Banks pay you interest on the money you leave in the account.
• Bonus tip: Rather than deposit money every month, fund all the money upfront in the beginning of the year then deposit a monthly amount. That way, you’re always one year ahead of your bills.

I personally see the value in funding one year’s worth of bills beginning each year. Then you just set a monthly budget to replenish the account for next year. Doing this opened our eyes to what we’re paying for then decided to cut back on as much as we were comfortable with letting go of.

Emergency Fund

Money in this account is to be used only for absolute emergencies. Going out partying or navigating the world are not emergencies, those are luxuries. An emergency is an unexpected event life throws at you that usually requires a large amount of money to correct. 

Pushing to build up your emergency fund will come in handy when times are rough. The ability to help a family member with an emergency or pay an unforeseen medical expense is empowering. 

Best Practices For Your Emergency Fund

• Start with automatic deposits from your paycheck. A small portion of, say 5%, is a great starting point. Steadily increase it by 1% each month until you’ve reached at least 20%.
• Begin with saving just $1,000. It isn’t enough to cover all emergencies but it’s a start.
• Aggressively build up to 3 months worth of expenses. Then boost your account to 6 months worth. This will help lighten large financial setbacks like job loss.
• Never touch this money unless it is for an emergency. Never, never, never.
• Highly recommend opening a high yield savings account. You’ll earn a higher interest on your money compared to a regular savings account.

Key Tips For Your Emergency Fund

• As income increases, so should your emergency fund. Don’t fall victim to lifestyle inflation. If you didn’t need the money before, this is the perfect place to park it.
• If you can cover the cost for an emergency from another stash, leave this one alone and let it grow. Don’t stretch yourself too thin doing it though.
• Secure enough savings to weather most financial storms. It should never be an option to liquidate other accounts like retirement or investments for financial support.

There isn’t a rule set in stone saying you absolutely need to have 3 to 6 months of expenses saved up in your emergency fund, save whatever feels comfortable for you. Use this as a guide, build your stash, watch it grow, and manage accordingly.

Some people just sleep better at night knowing they have 2 years worth of expenses saved up in their emergency fund. If that is your personal goal, with consistent progress, you’ll get there. It sounds daunting but slow and steady wins the race. Every five paychecks would save you an entire paycheck worth of savings in your emergency fund, assuming you saved the 20% as suggested.

Emergencies can come from anytime, anywhere. Believe me, saving for emergencies should be a staple in your budget.  

Retirement Savings

Unless you plan on working forever, saving for retirement is a must and you needed to start saving yesterday. The more time you have to save, the more your money can grow with the power of compound interest. Taking advantage of this earlier is vital to retiring with enough money to sustain your lifestyle long after you leave the workforce..

Best Practices For Your Retirement Savings Account

• Invest, at least, up to the company match. Ask if your employer does this. Essentially this is free money as long as the minimum requirements are met.
• Contribute on a regular basis. Usually bi-weekly contributions are the most common method. Be sure that you have it set up to automatically deduct from your paycheck.
• Contribute as much as possible. Figure out your comfort level (based on your personal allocations) and expand it just a little. Try to reach the maximum amount.

Key Tips For Your Retirement Savings Account

• There is a maximum annual contribution. Be sure you understand what that is. The amount tends to fluctuate slightly upward each year.
• Use other retirement vehicles when needed. For a business owner or self employed, you can set up other accounts like an Individual Retirement Account (Traditional or Roth), Solo 401(k), or others.
• Know the differences between each type of retirement account. A perfect example is a Roth IRA which grows tax-free, and your withdrawals are tax-free (if you meet the requirements) whereas a 401(k) is not.

Biggest takeaway with retirement accounts is invest early, invest often, and let it grow. If you can max out your contributions, you are well on your way to retiring comfortably, if not earlier than expected. Unless you are 10 years out from retiring, save aggressively and ride out the market swings. Take it from me, don’t skimp out on this account. I regret investing so little when I started working back in 2008.

Big Ticket Items

These are your more expensive but pre-planned items (home projects, down payment on a home, car purchase, appliances, furniture, etc) that need saving up for. The cost of the item is relative to your level of wealth or income. What is considered “big” to someone who earns $60,000 per year may not be that huge for someone who earns $300,000. 

Best Practices For Your Big Ticket Items Account

• Think and plan ahead. These should be predictable expenses that you plan to pay for and know exactly how much it costs.
• Save a smaller portion than your other more important accounts. Treat your emergency fund and retirement savings with a higher priority.

Key Tips For Your Big Ticket Items Account

• Set a cap on how much you save in this account. Your purpose is to save for a certain item not to build this to more than you really need. All your extra money should deposit into your family emergency fund instead. 
• Save up the full amount before buying. Don’t allow yourself to purchase anything until you’ve saved up 100% of the cost in this account first.

Mrs Simple FI has been reminding me how much we need to replace our sofa. So we decided to cut back on other areas of our monthly budget then plow that savings into this account. Having enough savings really helps my financial brain not flip out when making big purchases like this.

Generosity Fund

Holidays, special events, and gatherings come every year and it’s a good idea to budget for them. This becomes more prevalent (and expensive) as you age and your kids make more friends. You want to be able to cover the cost of gifts, presents, and even tithing. 

Best Practices For Your Generosity Fund

• Store a realistic amount here. Review your previous year’s gift spending, write out how much you spent and give it an honest review. 
• Save year round so you’re not left empty handed. Designate a small amount to save each month. 

Key Tips For Your Generosity Fund

• Stick to an assertive budget. Nullify the sense to overspend especially around the holiday season. If you don’t have the money saved, don’t buy the item.
• Refrain from overfunding. Any surplus money here will likely be spent.
• Don’t exceed more than 1% of your yearly income. This is a general rule of thumb.

Think of different ways you could save on gifts this year. Shopping earlier, before the holiday season, could save you a few bucks. Even giving a few less gifts could help. There are many other nifty tricks to help you cut back on how much is needed to save. Personally, we’ve tried every trick to help us cut back on gift spending. Guess that’s what comes with building a network of great friends. Just ensure you have enough in your generosity fund to cover anything when the event comes.

Fun Fund

Finally the fun account. After saving for your emergency fund, investing for your future retirement, planning for your irregular bills, now you can safely save for your fun occasions without regret. Your family will feel recharged after a much needed vacation.

Best Practices For Your Fun Fund

• Determine the total cost of a trip for your family. Safely estimate how much you’ll need per person. Start with saving $500 per person and scale it either up or down based on your preference.
• Set aside a small portion of your income each month. If vacations are important for your family, start with saving 5% each paycheck.
• For families that treat vacations with high importance, reallocate extra money from other accounts to your fun fund. This is after you’ve funded every account fully.

Key Tips For Your Fun Fund

• Budget first, vacation later. Align your vacation experience to your planned budget, not the other way around.
• Don’t break the bank. It’ll be tough to not overspend during your vacation but that’s why it’s critical to follow a budget.
• How much you save depends on the frequency of your vacations. Sit down with your family and discuss what the right number of vacations per year (or every other) would be. 

Families that travel more than once a year will need to either a) save a larger amount more often or b) reassess their financial situation. A fun fund shouldn’t be your top priority as far as saving is concerned. But everyone needs to have that time to recharge with the ones they love. Perhaps one less vacation this year would really help build the other more important accounts then you can get back to a normal routine next year. 

Even taking a smaller cheaper vacation one year so you can save up for a bigger one the next is another great option. That way you aren’t deprived of the well deserved time off. That’s our plan with this fund. Just plan well in advance so you aren’t liquidating any other accounts to help finance your trips.

BONUS TIP: PERSONALIZE YOUR ACCOUNT

Naming your account does a few things for you. 

1. That name is personal to YOU
2. You know exactly what the account is being saved for
3. Quick identity of account when budgeting
4. Emotionally attaches you to the goal

The names you give your account needs to resonate with you. Try adding creativity to them. Rather than saying “Trip 2020” try using “Trip to Disneyworld 2020” instead. It resonates more with your brain and your feelings. Give it a try and notice what it does to you.

We had to get extra creative with our names. Our credit union limits us to 20 characters and I badly wanted to include the maximum amount for each account in their nickname so I knew exactly how much our cap was. It ended up sounding like characters from The Avengers squad, “Vacay Max 4000” or “Misc Max 200”. It is pretty neat seeing these accounts building and ready for war when I need them.

Conclusion

Opening more bank accounts doesn’t sound like an ideal way to organize your finances, until you actually give it a try. Most banks will allow you that option. So you could actually have your checking account and several savings accounts in one place and not have to shuffle money between different banks. It worked for me, as a start, but I now use different banks for different reasons.

When all is said and done, and you view your fully funded personalized account, you can feel reassured knowing that spending it won’t jeopardize your financial goals because this money served its purpose. 

How many different bank accounts do you have? Do you plan on opening more? What is stopping you?