The 3 Must-Have Bank Accounts to Organize Your Finances (and My Bank Account Set-Up)

How many bank accounts do you have?

Likely the answer is one – and if that’s the case, then certainly continue reading this article.

If the answer is more than one, then – depending on how you use them – you might not benefit from reading this as much, but still, continue reading.

The 3 Bank Accounts You Should Have to Organize Your Finances (and My Bank Account Set-Up)

While having multiple bank accounts might sound like a hassle, it helps me keep better track of my finances, spend less on unnecessary things, and be better prepared for any potential emergency that I might encounter down the road.

And, I believe, it can help you do so too.

Regardless of how much money you have now or how much you earn.

For reasons I will explain further down in the article, I currently have six different bank accounts. That’s likely too many for most people, however, I think every single person should – at the very least – have three different bank accounts, each serving a different purpose.

So what are they?

The Three Must-Have Bank Accounts

The three-account set-up that you can benefit from having separate regardless of your net worth, savings, or income includes a transaction account, a savings account, and an emergency fund.

Must-Have Account #1: Transaction Account

If you currently only have one account, then it’s this one – although it also doubles as a savings account and an emergency fund.

Opening two more accounts for your savings and emergency fund will help you separate your day to day transactions from longer-term savings and from a buffer of money that you should never touch unless you are in a serious emergency.

While you could technically say to yourself “I will never let my balance go under [whatever amount]” and have that as your “emergency fund,” chances are over time you would be tempted to spend that money even during non-emergency.

Similarly, you could say to yourself “I will save [whatever percentage] of my income” and keep that money in your single account as savings, chances are that over time you would be tempted to spend that money on things you don’t truly need.

Having a dedicated account for your transactions – for receiving the money you earn, for paying bills and other expenses, and for funding your savings account and emergency fund (and in the best case, even investments) – will help you avoid that temptation by keeping your hard earned money out of sight. And, thus, out of mind.

Must-Have Account #1: Transaction Account

Must-Have Account #2: Emergency Fund

If you only open one additional account to your existing transaction account, make it this one.

As the name, “emergency fund,” suggests, the money in this account should be only used for real emergencies. That, by definition, means that it should only be used for unexpected expenses.

Let’s take owning a car as an example.

If you are planning to buy a new set of tires, that is definitely not an emergency. If your car suddenly stops working, you take it to the shop, and find out that an expensive part has to be replaced – now, that’s an emergency.

Especially so if you use you need your car every day to get to work or similar.

As far as what exactly qualifies for an emergency and what is just a random unexpected expense, you will have to decide. One thing is clear, though – Nike, LEGO, Apple, or whatever company releasing a new product and you really wanting to buy it is certainly not an emergency!

To get your emergency fund started, open the account, decide on the amount you want to always have saved for a rainy day (whether it’s an absolute value like $1,000 or a multiple of your monthly expenses), and start funding it.

Fill your emergency fund to whatever your target amount is first before you start funneling money into the savings account I talk about below.

Also, to prevent yourself from spending the money in this account unless truly necessary, you might want to avoid having a debit card issued, or at least hide it really well.

Must-Have Account #2: Emergency Fund

Must-Have Account #3: Savings Account

Finally, the third account that you should have is a savings account where you will “store” your unspent and uninvested money to keep it out of your sight. Just like with your emergency fund, try not to get a debit card for this account.

In terms of funding this account, if you have a stable salary, just pick a percentage of your income – let’s say 10% – and move it from your transaction account into the savings account before you have a chance to spend the money.

If possible, set up an automatic transfer.

If, like me, your income varies from month to month, keep your average monthly expenses in your transaction account, and move whatever is left over into the savings account. Sometimes that might mean not transferring any money over, while other months you might be transferring a larger-than-average sum.

As far as spending the saved money is concerned, it will depend on your situation.

You might want to spend it on an annual vacation, on your children’s education, or on whatever item you really want.

Or, if you are not doing so yet, then you certainly want to start investing – rather than spending – part of it over time.

Whatever the case, though, you certainly don’t want to spend it left and right on impulse purchases.

And, you want to avoid having to transfer that money back into your transaction account as much as possible to keep living a life you can afford with whatever your income might be at any given point in time.

Must-Have Account #3: Savings Account

The Six Bank Accounts That I Have Open

Having the three accounts I talked about above should be a good starting point no matter what your situation is.

Over time, though, depending on whether you are an employee or self-employed, whether you have a side-hustle or not, whether you have children or not, or whether you are trying to save for something specific like a pilot license – in which case you might want to have a dedicated account just for that – you might get into a situation where you would want to open more accounts.

Just to give you an example, below are the six bank accounts that I currently use:

  1. Living expenses account – I pay all of my bills and other personal expenses out of this account. It more or less serves the function of the transaction account I talk about above except that my income doesn’t go directly into it.
  2. Emergency fund – No explanation necessary.
  3. Saving account – No explanation necessary either, although I should note here that before moving the “leftover funds” here, I also make sure to invest a small amount of money every single month.
  4. Joint account with my girlfriend – My girlfriend and I contribute regularly to this account to save for any apartment-related expenses, etc.
  5. “Offline business” account – All of the income that I earn “offline” (consulting, writing for magazines, etc.) is paid into this account, and the above four accounts are funded from this one.
  6. “Online business” account – All of the income that I earn “online” (advertising, affiliate, etc.) is paid into this account. Currently, I avoid using those earnings for living expenses, and reinvest them into my websites instead, but in the future, the plan is to have them fund the first four accounts as well.

Summary

For years, I only had one bank account and thought that having more would be an overkill.

Then I opened my savings account, and by putting some of the money I earned out of sight, I definitely started spending less. I would still go into the savings account every now and then, though, to pay fund some of my bigger purchases, and so I decided to open an emergency fund – to have a buffer in case something goes awfully wrong.

My business (although as a self-employed person, technically they are still personal accounts) were opened last – and for now, were the last missing pieces of the puzzle for me.

It’s thanks to having those two accounts that I can easily sync the transactions with my accounting software without having tons of unnecessary personal transactions sync as well, and keep better track of my earnings and progress overall.

So yes, regardless of whether you start with opening just an account for your emergency fund, or get a savings account as well, if you only have a single account now, it will be a step in the right direction.

Although going to the bank and opening an account might be a bit of a short-term hassle at first, it will more than pay for itself over time.

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