It’s no secret that organizing your finances can be a total drag, but I am here to show you how to make it easy by setting up multiple savings accounts.
Finances can be a difficult or unwanted discussion that we have with ourselves or our significant others each month. If you live paycheck to paycheck then you might be having those conversations on the daily.
It doesn’t have to be like that!
I am here to tell you that your finances can be made easier! First of all, if you are living paycheck to paycheck then check out this post to find out how to break the cycle.
Now, if you have the general concept of your monthly budget down but you feel like it is too hard to keep track of or it is still overwhelming then keep reading!
I try really hard to keep all aspects of my life in some state of organization and my finances are no exclusion. When my finances are organized, they are much easier for me to review to look for improvements.
The best and easiest way that I have found to keep my finances organized is by having multiple savings accounts.
I want to start out by saying that my exact system of savings accounts will not be the perfect fit for everyone but I want you to use mine as a an example or starting point to get your savings accounts setup.
I currently have one checking account and five savings accounts. My husband is a joint-owner of one of those savings accounts.
Why isn’t he on all of them?
Well here is our current bill pay system. We each pay a certain amount of our mortgage each month. Each of us then puts our amount into our “house” savings account and then we have our mortgage setup so that we make a payment every two weeks. Check out this post to find out why setting up our mortgage payment like this will help us to pay our mortgage off early.
We are then each responsible for certain bills. I pay for our Internet and natural gas bill and my husband pays for the electricity and TV bills.
When we are saving for large things like property tax payments, house remodeling or vacations, we will add the money to this savings account.
This is what works for us and I totally get that this way would not work for everyone out there. I just wanted to give the whole picture of our savings account setup.
You will notice that I don’t have a savings account to match every budget category that I have. This is because if I pay for something on a monthly basis, then it will come out of my general bill pay savings account. It doesn’t make much sense to separate out all the small categories when one account will work.
The Savings Accounts that I Have
I currently have five savings accounts setup. I anticipate that number to grow as we start having children. My employer allows me to portion out my paycheck so that the amount that I designate will be deposited into each of the accounts below for every paycheck that I get.
Housing Savings Account – as mentioned earlier, I have a savings account specified for our house. Our mortgage payments are auto-deducted from this account every month. This is also where my husband and I save for large house expenses (taxes, insurance, new appliances, etc.) as well as our combined “emergency fund”. Anything that we are saving for together will be added to this account.
My Bill Pay Savings Account – I use my credit card for 99% of my purchases. I am more likely to waste money when I have it in the cash form. I also pay my entire balances off in full every month. This savings account is where I hold my money until I am ready to pay one of my credit card bills. When I am ready to pay a bill then I simply transfer that $ amount over to my checking account and setup an online payment.
Dogs Savings Account – I currently have a monthly budget category of $100 for my two dogs. This savings account is separate from that monthly budget.
I use the monthly budget amount to buy their food, treats, toys, etc. The savings account is for vet visits, their heartworm and flea prevention (it is cheaper to buy this in bulk!), or any unexpected medical expense.
As of recently, Wes has been on a terror while we are at work and has destroyed more than a few items of ours. I would use this account to replace anything that he destroyed.
I never want to be in a situation where something happens to one my dogs and I can’t afford to pay for getting them medical help. This is a large portion of why I have this savings account!
Utilities Savings Account – This is the account that I pay for our natural gas bills. Paying by credit card is not an option so I setup an ACH payment every month to have this bill paid straight from this savings account.
General Savings Account – I use this account to save for bills that don’t occur every month, like my car insurance, HOA dues, car title & license, etc. I also use this account to save for a new vehicle. I currently drive a four-door sedan but I know that once we have kids it will likely become too small.
If I ever need any car repairs or maintenance and I don’t have enough money left in my monthly “misc.” budget then I will use money from this savings account.
Checking Account – I transfer money into my checking account when I am ready to pay a credit card or other bill. I don’t keep much money in this on a regular basis and keep just enough in case I need to get cash from an ATM. I don’t use my debit card other than for cash withdrawals.
As we start to have children I would add a savings account for each child. Again this is my setup and I wanted to share it with you as a starting point for you to get started on setting up your own system of savings accounts.
What Types of Savings Accounts Should YOU Setup?
The type and amount of Savings Accounts that you setup is completely up to you and should be based on what works best for you and your family.
I definitely recommend that everyone have some sort of emergency savings account setup. You will never make a dent in your debt or build up your savings accounts if you are constantly having to find money for unexpected expenses.
Here are some ideas for different savings accounts that you might need
Emergency Fund – see paragraph above. You HAVE to have one of these!
Fun money – if you budgeting to be terrible and hate feeling restricted then save some money each month to do something fun. You don’t have to spend it all every month as you could save up for an awesome vacation. Or you could use it to buy yourself a coffee every now and then.
Children – save money for expenses related to your children. This could be for new clothes, activity fees, Christmas presents, etc. If you want to save for their school or college fund then I recommend looking into a savings account that is specifically made for education savings as they provide different benefits than a general savings account.
Medical Expenses – the reason that I don’t have a medical savings account is because I have an HSA (Health Savings Account) through my employer. A designated amount is deducted from my paycheck pre-tax. I use this account for all of my prescriptions and doctor visits so I don’t need a separate savings account. My HSA even allows me to earn interest on my balance or invest it in the stock market!
If you don’t have an HSA then I strongly recommend having a separate savings account for medical expenses. You never know when you could get sick or in an accident and have some large medical bills to pay.
Holidays – If you know that you completely blow your budget every year when the holidays roll around then start saving at the beginning of the year! This could be used for presents, new clothes to wear to events, food, drinks, etc.
Retirement – at this time, both my husband and I contribute monthly to our 401Ks. We don’t currently have a separate retirement savings account apart from our 401Ks. If your employer doesn’t offer a 401K or any other savings plan then make sure to setup a retirement savings account.
Do this one immediately if you haven’t already! Someday you will wish that you had started sooner!
Large, Non-Monthly Expenses – this is where you would save for expenses that don’t happen every month. This could be property taxes, car or home insurance, etc. This way when those bills do show up you aren’t scrambling trying to find the money to pay for them.
Large Purchase Goals – use this savings account to save for a down-payment on a house, a new car, or even a vacation that you want to take.
Benefits of Having Multiple Savings Accounts
Keeps me organized! Again people this is one of my favorite reasons for having multiple accounts! It separates out the transactions into several accounts, which is much easier to keep track of than one account with all of the transactions.
Prevents Overdrafts. Since I have to go in and shuffle money around when I want to pay a bill, it means that I will never overdraft because I would always move enough money to my checking account.
Also, check to see if your bank has overdraft protection where you can link accounts. If you would accidently overdraft your account, it would pull money from the other account. And NOT charge you a fee!
Easier than the envelope system. Maybe its because I am a Millennial but when I have cash in my wallet it usually gets wasted on something that I didn’t need.
For that reason, I have found it easier to use my credit cards for all of my transactions and not use cash. The envelope budgeting system is a great idea but would never work for me because of how I handle cash.
I find having multiple savings accounts can have the same end result as using the envelope system IF you can use your credit cards wisely.
Make money saving! This is probably my favorite part. When you are saving up for your car insurance payment due in 6 months, the money that you have put in that designated savings account will be earning interest!
When you first setup your savings account system you may not be accruing very much interest because your balances are low, but over time that will change and the interest that you earn will grow!
Tips for Implementing Your Own Multiple Savings Accounts System
Determining how much money to put in each savings account. Let’s use your “Large Non-Monthly Expenses” account as an example.
You know that you have a $500 car insurance payment coming due in 6 months. Divide $500 by 6 months and you get about $83. Now if you get paid bi-weekly then you would need to add $42 from every paycheck into this account. If you get paid monthly then you would add the full $83 each paycheck.
At the end of six months you would then have the $500. Now what is easier: saving $83/month or paying $500 out of pocket at once?
The amount you put into each savings account each month doesn’t have to stay the same. You should be evaluating these amounts often to see if any need readjusting.
Next let’s look at your utilities savings account. This one can be tricky since the bills will usually vary from month to month and can vary significantly from season to season.
I love spreadsheets so I of course setup a spreadsheet for my utility bills. I add up all of the month’s bills and then I come up with an average amount. This is the amount that I will then save to my utility account.
Let’s say that your average comes out to $50. You would put $50 a month into this savings account. In the cooler months you would likely use less electricity so you would pay less than $50, but in the warmer months you would pay more than $50.
Some utility companies offer an even payment plan where you pay the same set rate every month and then after a certain period of time they would evaluate your bills and see if the amount needs to be changed based on your usage.
If you want to use your utility company’s plan feel free to but remember that you would be earning interest if you did it yourself and used your savings account this way!
Look for a bank with no fees!
The banking industry is a very competitive world and it should be fairly easy to find a bank that will offer you savings accounts with no fees and no minimum balances required.
Keep in mind that online only banks may offer a higher interest rate.
I have been using multiple savings accounts for about three years now and I would never go back to just using one! How many savings accounts do you use? What are your savings categories?