How Multiple Bank Accounts can Help You Manage Money

Its a good thing to be adaptable, roll with the punches, go with the flow, and all that. So, when it comes to managing your money, its important to know all of the options you have at your disposal and use them to the best of your ability. One such tactic is spreading your money around into different bank accounts, each with it's own specific purpose, so that you know where your money goes, why it goes there, and how much you have to move.

The idea might seem a little daunting at first. After all, you have enough trouble keeping track of one account, right?! But stick with me here, and I'll guide you through the process and explain why it may be worth your while.

First, we're going to have to figure out where things go and why. You almost certainly already have a checking account, so that's one. Your main checking account should be used for everything you must keep liquid at all times. This mostly includes living expenses, mortgage payments, water, car..you get the idea right? No matter what happens you can get to this money.

Our second account will be a high-yield savings account. This will be for your emergency funds, your oh-crap-my-car-died funds, or the teeth-are-falling-out funds. You may have a savings account at your current bank, I know I have one at my local credit union with a hefty balance of one dollar. This is because you will almost certainly not be getting a competitive interest rate with most run-of-the mill savings accounts. You want your money saved to grow into even more money, right? So, head over to ING, (Full Disclosure: The links in this article are not referral links) or HSBC Direct. These banks pay competitive yields and will grow your emergency fund while you sleep. Best of all, these are FDIC Insured, so even if one of these guys folded, you'll still get your money eventually. An important reminder here is don't get a debit card for your emergency account. If you really need it, you can transfer the balance over in short order. If you have that money available through a debit card, you'll be tempted to spend it wherever you go.

Third, you're going to need just one more checking account. Since you don't want to mix business with pleasure by having your spending money and bills money in the same account. My personal favorite for this is the ING Direct checking account, since you earn interest and get your own debit card. If not, a checking account at any bank that you can easily move money into from your "main" checking account will work fine. Set a certain amount aside each week and put it into this account. Limit yourself, so that if you run out of discretionary money, you'll just have to wait!

In closing, the important thing to remember here is to automate the process. You don't want to be bothered (I don't either!) with moving the money around yourself each week. Instead, setup an automatic transfer, preferably on the payday, for the amounts you designated. In this way, every check you get deposited is immediately and efficiently spread out to their respective accounts.

Bills are paid for, you're ready for an emergency, and you can still go out for a beer this weekend with your friends.

Happy Saving!