Imagine getting paid on Friday and being down to your last dollar 10 days later and wondering how and where in the world all your money went. This used to happen to my family a lot before I realized managing my family finances with more than 1 bank account could prevent money evaporating out of thin air.
After several weeks and even months of feeling like my family was living paycheck to paycheck – I started my research. And that’s when I found out about having multiple bank accounts for multiple goals. So today I’m going to spell out the 6 different bank accounts to have while managing your family finances.
Note: this post does not specify the percentages or amount each account should receive every pay period. Check back for that post.
6 Accounts To Manage Your Family Finances
1. Family/Shared Checking
The family/shared checking account is responsible for the family bills.
This account is primarily funded by directly deposited paychecks. These pay checks will pay your utilities, rent, and any other monthly expenses. Furthermore, this is where the other accounts will get the majority of it’s funding from. You will need to set up automatic transfers.
Tips/Tricks: You will want to set up automatic transfers so that it’ll take a way a sense of responsibility, “what’s already done – is done.” This account should be located at your main banking institution and you should always have access to the mobile app and debit card.
2. Emergency Fund
The emergency fund account is an account for unexpected events.
An emergency fund is a must-have when managing your family finances. It’s also arguably one of the most important accounts you can get besides your primary checking up above. Why? Because you don’t know what’s going to happen in the future and better safe than sorry is the way to go, for sure!
You would use this account for managing true emergencies only. Roof leak, car accident, medical accident, appliance goes out, etc. And this is funded from your paychecks that are deposited into your primary checking.
Tips/Tricks: If you have debts, build a minimum emergency fund of $1,000 first then work on beefing it up to 3-6 months worth of living expenses (ie. expenses you can’t get rid of, rent, food, utilities, etc.) after you’ve paid your debt off. Your emergency fund account should be in a high yield savings account at a different institution than your primary checking.
3. Personal Checking
This is your personal fun account (each adult should have their own separate from the family account). What is money without fun every now and again?
This account is responsible for your personal purchases (like those new shoes you’ve been eyeing online for weeks), birthday or any surprise gifts for your significant other, personal grooming, etc.
This money will come from the prior agreed percentage of your paychecks.
Tips/Tricks: It’s always best to come up with some kind of allotment for personal checking accounts when it comes from your primary income. We actually fund our personal checking accounts with any side hustles or money made outside of our day job.
4. Short-Term Savings
This is the account you will use for things that you know are coming. Things like Holiday’s, family member birthdays, that new t.v. you’ve been wanting for the family, etc.
The difference between the short-term savings account v.s. long-term savings account (No. 5) is the amount of time needed to save for it. Generally, you’ll allocate your short-term savings account for things that are a maximum 9 months away. And you may not always be saving for something…that’s okay. The goal here is to be proactive.
This money will come from your Family/Shared checking on a monthly basis, ideally (weekly if you are off to a late start saving – because…life!)
Tips/Tricks: Keep this account attached to your Family/Shared checking account. Because it is a short time account, you’ll be okay with have a little bit more ease of access. In the beginning of the year, make a list of what is the same every year (parents and kids birthday’s, Holiday’s celebrated, Anniversary…whatever) and the amounts needed for each. Save for the soonest one first. Work your way down your list and take the amount needed divided by how many months (or weeks) you have and try your best to save that amount.
5. Long-Term Savings
This is the most exciting account for managing your family finances! This account give you excitement…and hope…and purpose…and all those other gushy adjectives.
Long-Term Savings accounts are used for those big things that will take several years to save for. Here’s an idea:
- Buying a Home
- Buying another or a new Car
- A big family vacation
- A fancy remodel
Or a combination of the above! Whatever your family finance goal, you need a place to save. This money will come directly from…you guess it….your paychecks.
Tips/Tricks: Open a high yield Money Market Account. Do your research and search around for the best rates. Doing your due diligence could be the difference between a 4 bedroom or 5 bedroom house! Consider allocating your tax checks to this account and even your bonuses if you get one!
6. Kids College Fund Account
Managing your family’s finances means looking out for your children’s future!
This account is for exactly what it says – higher education. This account has the most variables and unknowns within it. How much you save will depend on the age of your child(ren) and how many you have.
There are many different account types you can set this up within. I suggest an investment account called a 529 Savings Plan. A 529 Savings Plan is a tax-advantaged investment vehicle/opportunity that is designed specifically for saving for higher education.
Tips/Tricks: Consider exhausting all financial aid, scholarships, grants, and gifts before dipping into this account. Be sure to advocate for a public University versus a private University as they tend to be easier on the pockets.
Managing your family’s finances doesn’t have to be a headache. And you don’t have to constantly wonder where your money went at the end of the month. With a plan, you can succeed.
Every dollar you come in contact with should have a home.
What account do you wish you would have set up a long time ago? Let me know in the comments below!