Seven bank accounts every family should have

Most people have two accounts, one savings, and the other, current. Have you ever considered opening more accounts to help you organise your money better? If not, then you should, according to http://funcheaporfree.com. You don’t have to have lots of money to do it.

• Family emergency savings: As a rule, 20 per cent of your income should automatically go into savings each month, and this is the ultimate account for your savings. As a rule, this account is for absolute, dire “we are going to lose our house next week if we don’t do something” emergencies. Picture it as the fireproof apocalyptic vault hiding behind concrete walls in your basement, or the piggy bank you have to shatter to open. You should never touch this account unless it is your absolute last resort! And it should never be for anything that can be resolved in other ways, including paying off debt. Hopefully, you will never have to touch this account…but good thing you have it if you ever do.

Savings money should be automatically withdrawn from your paycheque every month (20 per cent ideally) and deposited into this account. You should pretend that this money doesn’t exist when considering your income/budgets.

• Family regular savings: This is your “holding tank” account; the savings account that you can tap into when needed. This account is used to hold three months’ worth of cash to live off of at all times in case of a short-term emergency. It is mainly used to hold money you are using to save up for something pre-planned (down payment on a house, new bedroom furniture, major home repairs, family vacation, new car, upcoming wedding, etc.), and to pay for unexpected expenses and emergencies (car repairs, new tires, unexpected home repair, etc.).

Automatically, draft 10 per cent from your paycheques to this account every month until the three months of cash is saved up, with the other 10 per cent going to your family emergency savings.

Once three months of cash is reached, no more automatic deposits from your paycheque into this account – only deposit leftover money at the end of the month. If you need more money in this account, you are going to have to cut back on your spending throughout the month! You never want to stop depositing the 20 per cent into your emergency savings unless it’s an emergency.

• Family current account: This is your “home base” account; the account where all paycheques/sources of income go initially. Your money starts here, then is transferred and allocated to other accounts. This is where you pay for minor car/home repairs, oil changes, utilities and all other bills (except for medical bills, more about this below), tithing/donations, and other “family” expenses.

All bills are paid from this account, preferably on auto-pay when possible to avoid late fees. Money shouldn’t stay for long in this account, because it will be divided up and allocated to other accounts shortly after depositing your paycheque.

Set up auto-transfers to other accounts to streamline the process of sending your money where it needs to go.

• Wife’s current account: Your monthly budget drafts from the family current account (see above) to this account every month. The money you spend for the month however you see fit. Whether you use cash, debit card, or credit card, it all comes out of this account. It makes it easy to keep track of your budget, will make it hard to over-spend, and will allow you the autonomy to use your own methods for budgeting and spending for your family, and will give you a place to keep your own “fun money”!

You should use this money to cover your budgeted expenses for the month, which needs to be determined in advance by each individual family.

• Husband’s current account: Same as wife account. This is the account you use to pay for your budgeted monthly expenses. By having husband and wife accounts, this gives each parent autonomy to spend however they see fit, while still being held accountable for the overall budget amount. It motivates them to be frugal where possible, helps allocate spending responsibilities for a family, and makes “who is in charge of what” clear and concise…which leads to less fights about money!
• Kids’ accounts: For every child you have, I propose opening up their own current and savings account. From day-one, you could be drafting a few naira a year (or however much you can spare) into their savings accounts, helping them to save up for university, their future wedding, a religious mission, etc. It is also a great place to deposit their birthday money into when they are too young to really use or care for money yet.

Once they are old enough to make their own money (allowance, work, babysitting) you should encourage them to put at least half into savings, and to manage the rest into a current account. Teach them to write cheques, use a debit card. Even, an eight-year old can understand these concepts if you teach them well enough.

• Extra savings account:Think of this as your spare change jar. This is the account where all extras go, according to http://funcheaporfree.com. At the end of the month your debt bills are paid, your 20 per cent has gone into savings, all accounts are accounted for, and you still have extra!

Toss it in here, and this is your 100 per cent fun money account! This money does not go toward bills or mundane things in any way. Once your debt is paid off, and your savings is under control, this account is your reward for spending wisely. Picture the movie “up.”

You need a plan for this money. It could be for a new TV, vacation, a trampoline, or something else fun that your budget may not allow for otherwise.

Get your family involved on this goal. Let it be a community fund where any extra money gets contributed toward a common, exciting goal. Make a chart for your fridge, or put little monies in a jar to represent every naira put in the account.

Copyright PUNCH.