Why You Should Use Multiple Bank Accounts for Budgeting


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If you’re like most people, you probably have one bank account that you use for everything. But what if there was a better way to manage your money? Using multiple bank accounts for budgeting can be a great way to keep track of your spending and make sure that you don’t get confused with your money.

The problem with having one bank account is that it can be easy to overspend or mismanage your funds. Having multiple accounts can help you stay on track and make sure that your money is going where it needs to go.

This is separate from digital money holding accounts online such as N26, as they offer separate accounts within 1 account to manage everything. Unfortunately, traditional checking and savings accounts aren’t up to par with this.

Personally, I have 1 business account, 3 savings accounts, and 3 checking accounts. These are all used for different purposes but help immensely when it comes to budgeting and planning my money.

Why You Should Have Mulitple Bank Accounts

Using multiple bank accounts can help you better manage your money because you can see where everything is and separate essential income/expenditure. Think of it this way, if you have $1,000:

  • $500 goes into the account for bills
  • $100 goes into savings
  • $100 goes into personal spending
  • $100 goes into a vacation fund
  • $100 goes into emergency funds

This is just a general example, you would, of course, have accounts for your own specific circumstances. So why should you have multiple bank accounts for budgeting?

1. You Can Better Manage Your Money

If you have all of your money in one account, it can be difficult to keep track of everything. Having multiple accounts can help you see where your money is going and make sure that it’s being spent wisely.

For example, if you had 1 bank account with $1,000, and you see something nice when you are shopping, you are likely to purchase it because psychologically the account has a lot of money in, making it difficult to calculate how much you can afford for personal items.

By having a separate account for personal spending – you can see exactly how much you have allocated for that month. You can even go as far as only taking a bank card for the spending account when you go shopping, to avoid any urges.

2. It Can Help You Save Money

When you have multiple accounts, you can easily set aside money for specific purposes. This can help you save up for a big purchase or put away money for an emergency fund.

For example, you could have a savings account for your vacation spending money. This way, you can transfer a certain amount of money each month into the account and know exactly how much you have to spend.

You could even take this a step further and have 2 savings accounts, 1 long term, and 1 short term, this can help split them for big purchases that aren’t essential right now and things like a vacation fund.

3. You Can Earn Interest

When you have multiple accounts, you can choose to keep your money in a high-interest account. This way, you can earn more money on your savings.

For example, if you have $1,000 in a savings account that earns 2% interest, you’ll earn $20 in interest each year. However, if you have $1,000 in a savings account that earns 5% interest, you’ll earn $50 in interest each year.

This is where you need to source the savings accounts with the highest interest rates. You would put long-term savings into the highest interest account so it can grow while you aren’t touching it.

5. You Can Keep Your Money Safe

When you have multiple bank accounts, you are essentially spreading your money across different banks. This can help protect your money in case one of the banks fails. Whilst accounts are generally protected by the Federal Deposit Insurance Corporation (FDIC), which means your money is protected, some banks may not be protected by this insurance.

Not only is it about keeping your money safe, it’s also about keeping your savings safe. If your savings are over the FDIC limit, your money can be at risk. Also, if you have a 10% interest rate on one account, the bank could lower that rate to 1% and your savings plan would suffer. Having another account means you can simply move the money across without having to take drastic action.

6. You Can Have Peace of Mind

This is the one main goal of every person when it comes to personal finance, having peace of mind. If you have one account with thousands of dollars coming in and out every month, it can be overwhelming to keep on top of. You can lose track of spending, may fall short on bills, can incur fees, and might not catch any double charges.

When you have an account for different aspects of your budget, you will feel peace of mind that everything is organized and you know that you have enough money for bills, food, emergencies, etc. Just splitting one account into multiple, can do wonders for your mindset.

How Many Bank Accounts Should You Have

The answer to this question is – it depends. It depends on your circumstances, your goals, and what makes you feel comfortable. As mentioned previously, I have several, but I prefer to separate absolutely everything. The downside of this is that it takes some time to update my budget tracker.

The best thing to do in this aspect is to start out with an extra 2 accounts. Try 1 savings account and 2 checking accounts. Keep a checking account for bills then one for personal, and use a short-term savings account for a bigger purchase you have been wanting to make.

At least, in the beginning, this will get you used to using multiple accounts, how to move the money around, and how to track it based on your budget. Once you have started to develop these skills, you can add extra accounts and start narrowing down your budget even more.

But, at the end of the day, it’s entirely up to you how many bank accounts you have. It doesn’t matter if you have 2 or 20, as long as you are comfortable with it and it works for you.

It can be useful to think about your goals here. Why do you want to budget better in the first place? For example, if you really want to take a vacation every year and that’s the only reason you want to improve your budgeting, then having 1 extra savings account is probably going to be fine.

But, if you have multiple different goals you want to achieve with your finances, you might prefer to have several accounts.

How to Budget with Multiple Bank Accounts

The most difficult part about having multiple bank accounts for budgeting is tracking everything. Although this is also the most satisfying.

You will need to move money around every month to ensure it’s in the right accounts. You will also have to remember bank account information for every single card, login, and account.

Thankfully, spreadsheets have been around for years and with the advanced templates that are out there, it’s much easier to track your accounts.

You can set up your own spreadsheet with a simple dashboard to manually enter the budget every month. All you have to do is create a box with 2 columns and a few rows to record everything. Or you can do the opposite and list every aspect of each account to a T. It depends on how in-depth you want to go.

The other alternative is to use a tool or company to help, such as Personal Capital.

Whichever method you choose, make sure that you have a plan. There is no point in having multiple bank accounts if you’re just going to leave the money there and forget to transfer the amounts over.

The first step before separating out all your accounts is to actually create a budget spreadsheet and list out your income and expenses. If this isn’t done, or it’s incorrect, the whole budget will be thrown off and so will all your accounts.

There are also certain rules you can set up to maximize your budget efficiency… Let’s say in your account for personal spending you didn’t use it that month and had $200 left over. You could move that over to your account for emergency funds or long-term savings, then you continue to follow the budget flow and have more money in the long run.

Just because you have extra money there, it doesn’t mean you have to spend it. The issue here is that if you had that $200 left and didn’t move it, then had $400 next month, you might be fooled into thinking the following months will have $400, and it will throw you off completely.

So in my opinion, it’s always best to throw extra ‘scraps’ into savings or long-term accounts.

Popular Bank Accounts to Choose

There are multiple bank accounts for budgeting that all offer different features and interest rates. The most popular ones include:

Savings Accounts – These are the most common and usually what people think of when they hear the word ‘bank account.’ It’s a place where you can save money and grow it over time through interest. The only thing to be aware of is that some savings accounts have a limit on how many withd