After going through Financial Peace University, we found out we were doing a lot wrong when it came to our money…like pretty much everything! As we began our debt-free journey, we learned that we needed much more than just one bank account if we wanted to achieve financial freedom.
We realized we needed complete and total control of our money, including at least five financial accounts. Today we are talking about the five bank accounts every family should have to achieve financial freedom and establish wealth.
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Bank Account #1: Joint Checking Account
Ok, you’re probably thinking…well, duh…everybody has a checking account. But, if you’re like us, we didn’t get a joint checking account until we were married for almost 9 years.
Since we had separate checking accounts, we spent frivolously…without a budget. Neither of us knew what the other was spending. I remember just transferring money to and from each account to pay bills and buy what I needed for the house, kids, etc.
It was a hot damn mess!
So, when we finally decided to get a joint account, it was a total game-changer. We were able to budget and actually stay on budget. At last, we were on the same page with our spending!
So, if you’re married, make sure you’re managing your money together with a joint checking account.
Bank Account #2: Emergency Fund Savings Account
An emergency fund is your insurance, you know…in case shit happens. This is your lifeline if you lose your income or if anything else emergent pops up.
Ideally, you should have 3-6 months of bare-bones expenses put aside for unexpected events. An emergency fund, however, is not an investment account.
This account should be easily accessible. Therefore, a regular savings account or a high yield savings account works perfectly.
If you’re in the process of paying down debt, you probably won’t be able to save for a full 3-6 months. So, a smaller amount such as $1000 (like Dave Ramsey recommends) will help cover any small unexpected events until your debt is paid off.
Bank Account #3: Retirement Account
Saving for retirement doesn’t seem to be on the list of priorities when you’re younger (at least it wasn’t for me). But, the sooner you get started, the better your retirement will be funded.
Most financial planners recommend putting 10-15% of your monthly income into a retirement account. These monthly savings can be set through an employer or bank and deposited into a 401k or IRA (Roth or traditional).
There are other options for investing after you hit the max on your 401k or IRA contributions. So, I highly recommend meeting with a financial advisor to help you navigate saving for retirement.
Personally, we didn’t save for retirement while we were in baby steps 1-3. After we moved to baby step 4 (saving for retirement), we set up an appointment with an advisor to help us plan our financial future.
Bank Account #4: Sinking Fund Saving Account
Sinking funds are a way of saving for things that you want or anticipate you’ll need. With sinking funds, you set aside a certain amount of money each month until you have the amount you need to pay cash.
It’s best to save a little each month, so you don’t stress about coming up with the money later or getting into debt.
For example, if you wanted to save $500 for Christmas, you would save $45.45 each month starting in January through November to have the cash you need. This way, it is more manageable, and you’re not scrambling and probably using credit to pay for the upcoming holiday.
Having money saved eliminates the need to use credit cards. It also teaches delayed gratification and spending with intention.
Bank Account #5: Kids Education Account
The last account you need is a way to pay for your child’s education. Now, I have to admit this is something I initially thought we didn’t need (or would ever be able to afford). But, after paying off my student loans and seeing what a rip-off they were, my mind changed.
I suggest starting with a goal of how much you want to save and then figure out how much that would be monthly. This college savings calculator from Anthony ONeal will help you figure out an estimate of what you need to save…if you’re feeling stuck with the amount.
Then, start investing your money into an education account such as an ESA (education savings account), a 529 plan, or an UTMA (uniform transfer/gift to minors act).
To sum it up, these are the five bank accounts every family should have….
- Joint checking account
- Emergency savings account
- Retirement account
- Sinking fund savings account
- children’s education savings
You may only have a checking account as you start your journey toward financial freedom. But as you work your way out of debt, you can add these accounts as you see fit.
You will quickly see how important these 5 bank accounts are for establishing wealth and living financially free.
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