Why I Have 7 Bank Accounts

And why #6 Is my favorite

When you have expenses to pay for, whether they be an expected expense like buying birthday gifts or an unexpected expense like the engine in your car dying, where do you get the money to pay for these expenses?

Many people will simply put these expenses on their credit card, which is a recipe for financial disaster.

Others might take it out of their emergency fund, which is not the best use of an emergency fund, especially for expenses that you expect to have, like buying birthday gifts or going on vacation.

In this article, I will explain why I have seven bank accounts and how I use them to reduce my anxiety about spending money.

1. Checking account

First on the list is a basic checking account. This is where my paychecks are deposited and where all my automatic bill payments and savings withdrawals come from.

I think of my checking account like an airport with money constantly flying in and out every day. Like an airport, the money does not live in my checking account; the checking account's purpose is to park that money before it gets where it needs to go.

My checking account does not pay me any interest, so I only keep enough in my checking account to ensure I will always have enough money to meet all my financial obligations.

2. Vacation fund

My wife and I love to travel, and that is why we have a specific pot of money set aside for travel and vacation.

If you have ever put a trip to Hawaii on a credit card with no plan on how you’ll pay that money back, you need a vacation fund.

It’s very simple; you figure out how much you want/can afford to save towards future vacations, and then when it’s time to go on holiday, you plan a vacation that you can pay for using your vacation fund.

If the trip to Hawaii costs $5,000 and you only have $1,200 in your vacation fund, I am sorry to say, but you aren’t going to Hawaii this year. Find a vacation that you can enjoy for $1,200 and start saving enough money in your vacation fund to make the Hawaii trip happen next year.

When I first set up my vacation fund, I underestimated how much money I would need. So, when I get a raise, I take a portion of that new money and use it to increase my monthly savings into my vacation fund.

3. House fund

Owning a home is expensive. It requires constant repairs and maintenance that range from painting your bedroom to replacing your furnace. Just when you think your house is perfect, another problem arises.

If you own a home, you should have a house fund set aside to cover the annual cost of maintenance.

A common rule of thumb is that you should budget for annual maintenance costs of 1% of the purchase price of your home. So, if you bought a $500,000 house, you might expect $5,000 in annual maintenance expenses.

In that example, you would want to be saving $416 ($5,000 ÷12) per month into a house fund.

My wife and I go the extra mile on this one. We save 1% of the value of our home plus a little extra to cover household items we don’t need but want to buy. I am talking about things like a Vitamix or a new TV. These are purchases that I used to get stressed about spending money on, but I don’t even think about it if there is enough money in the house fund.

4. Car fund

Car’s are notorious money pits. According to AAA, between deprecation, insurance, repairs, gas, and monthly car loan payments, it costs, on average, $8,469 per to keep a new vehicle on the road.

When it comes to covering car costs, my wife and I absorb some costs like gas, insurance, and car payments into our monthly budget.

For the more infrequent car costs like repairs, oil changes, and buying new cars in the future, we set up a car fund. That way, if my car breaks down unexpectedly, I am never wondering where I am going to get the money to pay for the repairs.

5. Kid fund

Earlier this year, my wife and I became first-time parents. While we did not know exactly what to expect, we know one thing was certain; it costs a lot of money to raise a kid these days.

In addition to the college education savings fund we set up for our son the day we brought him home from the hospital, we also have a savings account we call the “kid fund.” While my wife was pregnant, we were saving a few hundred dollars per month into the kid fund to cover all types of baby-related costs like toys, food, crib, diapers, car seat, etc.

We were pleasantly surprised and lucky to learn that many of the costs we were saving for we got for free. Between the baby shower, hand-me-downs from my wife’s two older sisters (who have a combined 5 children), and my wife’s incredible skill and buying and selling baby-related items on Facebook Marketplace, we have not had to draw down much on the kid fund.

We keep saving money into the kid fund because we know as this kid grows, he’s only going to get more expensive. As he gets older, we are thinking of converting the kid fund into a birthday/Christmas fund to avoid the financial stress that many parents must deal with.

6. “Us fund”

“Adulting” is hard. With all the financial and time commitments we have as our family grows, my wife and I found it hard to find some time just for us.

That is why we put $100 per month into an “us fund.”

We can use the us fund for a date night; going to the movies, ordering take out, or going to a coffee shop on the weekend and ordering some $6 stupidly expensive coffee and just chilling.

Having an us fund allows us to splurge on some luxury activities and spend some quality time together without breaking the bank or jeopardizing our financial goals.

This is my favorite of all of my seven bank accounts because it’s purpose is to facilitate more time with my wife.

7. Emergency fund

Last but certainly not least, we have our emergency fund.

Generally, an emergency fund has two purposes.

1. To help cover significant and unexpected costs that arise.

2. To cover basic living expenses for a period of time (typically 3–6 months) in the case of a job loss.

Since we have six other bank accounts filled with money, we don’t use our emergency fund to cover unexpected costs.

· If the furnace dies on us, we have enough cash to cover that cost in our house fund.

· If our car breaks down, we have enough cash in our car fund to cover that cost.

· If some other unforeseen expense arises that we are struggling to pay for, we have access reserves of cash in our other accounts like the vacation and us funds that can be used to cover those costs.

Our emergency fund has the sole purpose of covering our basic living expenses for a few months if either of us loses our job.

Final tips

Having these 7 bank accounts takes a lot of financial stress off my plate. Most of all, it makes me feel less anxious about spending money. If I have already budgeted for and saved the money in a specific bank account, I am not agonizing over the opportunity cost of spending money.

If you want to emulate this model, there are a few final tips I have.

Make sure you set up accounts that don’t have a monthly fee. The reason I can afford to have seven different savings accounts is that I am not charged a monthly fee unless I go over a certain number of transactions. Since I never do, I never pay any banking fees. Do not open seven bank accounts if you’re going to end up paying a monthly fee for each account. If that is the case, open one account and find another way to track your savings, like on a spreadsheet.

Once you have budgeted for your specific savings into these accounts, ensure you follow through on your plan by automating your savings. However, never automate your savings unless you are sure you have enough money in your checking account each month to cover your financial obligations. The last thing you want is to get hit with a “non-sufficient funds” fee.

Happy savings.

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This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.