There is no agreement among money
managers as to how many bank accounts an individual or family should
have. Experts have come up with various numbers.
According to funcheaporfree.com, there are five bank accounts every family must have if they seek to manage their finances effectively.
Most families have one savings account
and one current account. This has been the norm since dinosaurs roamed
the earth. While it works well for many, it is believed that having only
one or two bank accounts can make it harder to keep track of your
money.
The fact is, most families statistically
have trouble making and keeping a budget. This means that the system
may just not work that well.
Below are five bank accounts every family must have, according to funcheaporfree.com:
- Family emergency savings
As a rule, 20 per cent of your income
should automatically go into savings each month, and this is the
ultimate account for your savings. As a rule, this account is for
absolute, dire “we are going to lose our house next week if we don’t do
something” emergencies. Picture it as the fireproof apocalyptic vault
hiding behind concrete walls in your basement, or the piggy bank you
have to shatter to open. You should never touch this account unless it
is your absolute last resort.
Savings money should be automatically
withdrawn from your paycheque every month (20 per cent ideally) and
deposited into this account. You should pretend that this money doesn’t
exist when considering your income/budgets.
It needs to be an “out of sight, out of
mind” account. Don’t even bring it up when calculating your money as a
family, and NEVER consider it as an option for pulling money out of when
needing to pay for something…unless it’s a literal life-or-death
situation.
You can open this in any savings account, but it is recommended that you open this account through an online bank.
With this account, you can effortlessly protect your family from the worst-of-the-worst circumstances.
- Family regular savings
This is your “holding tank” account; the
savings account that you can tap into when needed. This account is used
for holding three months’ worth of cash to live off at all times in
case of a short-term emergency. It’s mainly used to hold money you are
using to save up for something pre-planned (down payment on a house, new
bedroom furniture, major home repairs, family vacation, new car,
upcoming wedding, etc.), and to pay for unexpected expenses and
emergencies (car repairs, new tires, unexpected home repair, etc.).
Automatically draft 10 per cent from
your paycheques to this account every month until the three months of
cash is saved up, with the other 10 per cent going to your ‘Family
emergency savings account’.
- Family current account
This is your “home base” account; the
account where all paycheques/sources of income go initially. Your money
starts here, then is transferred and allocated to other accounts. This
is where you pay for minor car/home repairs, oil changes, utilities and
all other bills (except for medical bills, more about this below),
tithing/donations, and other family expenses. All bills are paid from
this account, preferably on auto-pay when possible to avoid late fees.
Money shouldn’t stay for long in this
account, because it will be divided up and allocated to other accounts
shortly after depositing your paycheque. Set up auto-transfers to other
accounts to streamline the process of sending your money where it needs
to go. Once all your money has been deposited to this account and sent
to where it needs to go, it will be easy to see if you have money
leftover at the end of the month! Big pat on the back for leftover,
un-spent money. Any money left over in this account should go to ‘Family
regular savings’.
- Wife’s current account
Your monthly budget comes from the
‘family current account’ to this account every month. The money you
spend for the month, however, you see fit. Whether you use cash, debit
card, or credit card, it all comes out of this account. It makes it easy
to keep track of your budget, will make it hard to over-spend, and will
allow you the autonomy to use your own methods for budgeting and
spending for your family, and will give you a place to keep your own
“fun money”!
You should use this money to cover your
budgeted expenses for the month, which needs to be determined in advance
by each individual family. Sit down and write out every single thing
you spend money on, then divide up responsibilities! If you do the
cooking, you should buy the groceries so you know what you need.
- Husband’s current account
This is the account you use to pay for
your budgeted monthly expenses. The same rules apply as with the ‘Wife
current account’. By having the husband and wife current accounts, this
gives each parent autonomy to spend, however, they see fit while still
being held accountable for the overall budget amount.
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