CNN Underscored reviews financial products based on their overall value. We may receive a commission through our affiliate partners if you apply and are approved for a product, but our reporting is always independent and objective.
When I first started getting serious about my financial goals, the first thing I looked at was where I was keeping my money. For the most part, everything was in my checking account and I’d occasionally transfer some money to my savings account. This wasn’t working for me.
Now, I have 3 checking accounts and 2 savings accounts, and it’s been a game changer.
While I know the idea of juggling multiple accounts might sound overwhelming, it’s not as complicated as you might think and there’s a method to my madness.
Today, I’ll break down what I use each account for and how it’s helped me progress on my financial journey. Let’s dive in.
Each of my checking and savings accounts has a different purpose. Some are for my side hustles, others are for fixed and variable expenses. Here’s a look at each account and what purpose they serve.
This is where I pay all of my recurring, fixed expenses from. This includes rent, student loans, car insurance and other monthly bills.
I have my paycheck set up so that only the calculated amount (and some change) goes directly into this account. I made sure to give myself some extra cash as a cushion because although the expenses paid from this account are “fixed,” there’s always the potential for a higher-than-expected utility bill or a quarterly expense coming through. And ultimately, I don’t want to risk an overdraft fee.
I pay all my credit card bills from this account, which includes more of my everyday spending categories like groceries, gas, dining out, shopping and other more “fun ”things.
Again, my paycheck is set up so that a certain percentage goes directly into this account and there’s no manual transfers that I need to do. By dedicating one account towards spending, I’m able to more easily monitor my “budget” for the month. To make sure I’m on the right track, I pay my credit cards on a weekly basis.
I have a few side hustles, which naturally comes with additional income and expenses. I like to keep my personal and business finances separate as it helps me better track my side income and any business-related expenses.
That said, I’m also responsible for paying self-employment tax as a freelancer. My business checking account offers a feature that automatically sets aside a portion of my income towards my estimated taxes based on what I earn, which saves me a lot of stress down the road.
This savings account is what helps me sleep at night. I never touch it, but I sleep better knowing that if something unexpected were to come up, I would be prepared.
Experts generally recommend saving at least 3 months worth of living expenses. To find your number, you’ll need to calculate your critical monthly expenses. This includes things like housing, groceries, healthcare and utilities. Everyone’s number will be different as it is highly dependent on your situation, but regardless, having an emergency fund in place is always a smart idea.
It took me some time to build this up, but I was able to reach my goal through a mix of tactics.
First, I set up my paycheck so that a set percentage was automatically deposited into this account every paycheck. Second, I chose a high-yield savings account, which allows you to earn a high APY on your balance. At first, it doesn’t seem like much, but as your balance grows, so does the interest you earn. This can help you reach your savings goals faster and it requires no extra work on your end. Now, my balance continues to grow everyday even without additional contributions.
If you’re looking for a new high-yield savings account, you might consider the CIT Bank Savings Connect account that — at the time of publishing — earns 4.5% APY. This can be a good way to passively grow your emergency funds every month in an attempt to keep up with high inflation.
Read our full review of the CIT Bank Savings Connect account.
Vacation, weddings and car problems… These scenarios are all perfect examples of why you should have a rainy day fund. By setting aside money specifically intended for these fun activities, you can save yourself some financial stress down the road.
I store my rainy day funds in a high-yield savings account as well because I like to make my money work for me. I store these funds with Ally who offers a fun “savings bucket” feature that tracks your progress along the way and also allows you to separate your goals into different buckets while still earning a high APY on the total account balance. Anytime I make a purchase related to one of my buckets, I transfer the amount to my checking account and pay off my credit card that I used to make the purchase.
Related: Looking to build wealth? Here are some of the best ways to invest your money
While financial organization is the biggest benefit of having multiple accounts, it’s also helped me stick to my financial goals in more ways than one. Let’s take a closer look.
I have a hard time sticking to a rigid budget, in large part because I find tracking and categorizing every single expense to be exhausting. That one of the reasons the multi-account method works for me.
Similar to the 50/30/20 method, I set-up my paychecks so a certain percent goes towards each respective account and has a specific purpose. By doing this, I can easily see how much money I have available to spend and also know what’s off limits.
Before I had multiple accounts, my paychecks would go directly into my checking account and I’d maybe transfer some over to my savings. But in reality, it was another task I had to do and it’d mostly stay in my checking. In turn, I’d usually end up spending it rather than keeping it in savings.
By divvying up my paycheck and giving each portion an intention, I was able to reach my savings goals and then some. I found that when I didn’t “see” the extra money in my checking, I wasn’t tempted to overspend and didn’t notice a huge lifestyle change. I just had to be more thoughtful with how I was spending my money.
By storing my money in several different accounts with various banks, I’m less tempted to “dip in” and do a quick transfer. In my younger days, I was always passing money between my checking and savings account because it was too easy. Now, the funds are still accessible, but it’s more work and waiting, which forces me to think about my purchases.
If I’m being honest, what initially got me on the multi-account train was an enticing bank account bonus offer. Similar to credit card sign-up bonuses, bank account bonuses are offered as a way to bring in new customers. Typically, there will be a deposit and/or balance minimum requirement within a certain period of time and then you will be awarded a bonus — what’s not to love?
Related: Earn up to $2,000 in bonuses with this checking account
There is no “right” number of bank accounts to have. What’s important is doing what works best for you. If you like to keep things simple and find the idea of multiple bank accounts overwhelming, then stick with what works for your financial situation.
However, if what you’re currently doing isn’t working and you’re looking for a new method, this might be worth a try. Personally, having multiple bank accounts has helped me reach my savings goals, stick to a budget and be more mindful with my money in general.
Looking for a new savings account? Read our guide to the best high-yield savings accounts.
Get all the latest personal finance deals, news and advice at CNN Underscored Money.
Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.