Why You Need Multiple Bank Accounts
While many people only have one checking account and one savings account, I’ve had multiple bank accounts for as long as I can remember. In addition to setting financial goals and having a budget, having multiple bank accounts is how I’ve been able to manage my money, pay off student loan debt, buy a house and travel the world. The easiest way that I’ve found to manage my money is to have multiple bank accounts. In fact, you might be surprised to find out that I currently have 11 bank accounts (and have plans to open more in the future).
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Why 11 bank accounts?
So you might be wondering, why have 11 different
All 11 bank accounts are essential to executing my budget and honestly with so much going on financially, it’s how I stay organized.
Here’s a breakdown of all of my bank accounts:
- Checking Account (for daily use)
- Emergency Fund (check out the Best Savings Accounts of 2019)
- Business Checking Account (for daily use)
- Business Checking Account (for taxes)
- Car Insurance
- House Repairs
- Mortgage Fund
- Travel Fund
- Fun Money
- Debt Pay Off
Other bank accounts I’ve since closed or renamed:
- Roommate Deposit (for when I had roommates)
- House Down Payment
Press play and listen to this podcast episode where I explain why you need a travel fund.
What are the benefits to having multiple bank accounts?
Having multiple bank accounts allows me to manage my money more effectively because I can better track my spending and progress.
Personally, I don’t like to commingle funds because I tend to overspend.
To avoid this I keep it simple by separating out as many important budget categories as possible. And when I say separate, I mean that each budget category gets its own bank account.
Seriously, I can’t imagine my mortgage payment being in the same account as my travel fund. I’m not sure if my mortgage would ever get paid!
Nevertheless, by having multiple bank accounts, each checking account, savings account or money market has a specific purpose and manages a particular budget category.
Think of it this way, have you heard of the envelope system? Having multiple bank accounts is like having a virtual cash envelope system.
Similar to the cash envelope system where each budget category gets its own envelope of cash, I think of each bank account as a virtual envelope. But because it’s virtual, I don’t have to worry about losing money (besides fraud) or making sure that my money is in a safe place. And since I’m always trying to maximize my travel rewards by earning points and miles, I rarely carry cash anyway. More free travel, yes please!
Here are some other perks to having multiple bank accounts:
- Avoids financial distractions
- Keeps track of spending
- Sets money aside effortlessly
- Simultaneously work on multiple savings goals
- Easily pay bills and pay off debt every month
- Take advantage of bank perks like higher interest rates and bonuses
Is having so many accounts hard to manage?
Not at all.
Everytime I get paid, funds get deposited into designated bank accounts and once funds run out that’s it. I don’t dip into other bank accounts (or budget categories) to compensate.
For example, when my insurance bill is due, I know exactly where to go to find the funds.
Helpful Tip: You can even take it a step further and set up autopay directly from a particular bank account so you don’t have to get involved. When a bill is due, the funds will automatically be withdrawn without you having to make a payment.
Automation is a powerful tool.
Who is this strategy ideal for?
Having multiple bank accounts can work for anyone but this strategy is especially helpful if you have large annual expenses like a vacation you’re saving up for, have multiple savings goals, own a business or have infrequent bills that you often forget about like annual insurance premiums.
Overall having multiple bank accounts works for me. It’s simple, helps me build productive financial habits and despite the large volume of
Did you enjoy this article? Check out more by signing up for my budgeting course!
Tips for setting up multiple bank accounts:
- Figure out how many accounts you need based on your budget.
- Next take advantage of automation – direct deposit money from your employer into specific bank accounts so all you have to do swipe and spend.
Things To Do Every Time You Get Paid
Danielle Desir Corbett paid off $63,000 of student loan debt in 4 years, bought a house at 27, and has traveled to 27 countries, including her favorites, Iceland, China, and Bermuda. Go here to learn Danielle’s incredible story, from struggling financially and in debt to finding creative ways to earn more and live on her terms. Listen to The Thought Card Podcast, where Danielle shares how you can creatively travel more and build wealth regardless of your current financial situation. Reach out to Danielle by contacting: thethoughtcard (at) gmail (dot) com.
I appreciate how this article was written with full of impressive words. I have learned more information after reading this. Big thanks for sharing this informative article.
Thanks for the article. I have a question I was hoping you might be able to help with. Do you think it’s really necessary to hire an accountant for my small business? I’ve been using HR Block for years but I’m thinking of making a change. Looking forward to your reply! :)
Hi Victor, I think seeking the counsel of a tax professional is a good thing.