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How Many Bank Accounts Should You Have for Your Financial Goals?

Updated: Mar 5

I am going to start off by admitting I used to be a hoarder in this category.

Here's a bit about me: I love to get rid of things via donation, recycling, etc. I am a minimalist. To use the word hoarder hurt my soul a little bit.

But then I found the wonderful world of online high-yield savings accounts (HYSA). More on that below!

Checking Accounts

For starters, as an entrepreneur, make sure you have at least two checking accounts. One is for your personal use, and one is for your business use. The IRS would have a field day of making you go through your personal bank account with a fine-tooth comb if you ever had an audit. So, that’s rule number one: have two checking accounts. One is for personal use, and one is to deposit any and all money you receive as business payment (whether that is direct deposit, check, or cash). You will need to pay any and all business expenses from this same account unless you have a credit card designated for business.

Savings Accounts

For simplicity, it's easiest to open a High Yield Savings Account (HYSA) with an online financial institution that allows you to categorize your money. All the only stays in one place, just in different buckets. It's perfection. If you want to know what HYSA I'm currently using, feel free to email me and ask.

Note: It can take 1-5 business days to get money transferred from your HYSA to your checking account. Make sure you account for that timeframe when you need your money.

Now, as for categories (or if you haven't decided on a HYSA yet)...

Here comes savings category one: Taxes

When you get your payment, the rule of thumb in the business world is to put 20-30% of that into your tax account… immediately.

Note: You may or may not need to save more than the rule of thumb—your tax accountant can give you a more exact number based on whether you have any W2 income within your household, etc.

Savings category two: Recurring Items

I discuss this in more depth in another blog post, "What to do With Annual Expenses." If you haven’t read it yet, check it out. This one can be a lifesaver!

Savings category three: Emergency Fund

I will discuss emergency funds in depth in a later post. Still, for quick reference, if you're the family's sole income earner, you should have six (6) to nine (9) months of spending set aside for emergency situations. If you didn’t believe in this concept before, I have to assume the COVID-19 pandemic showed you exactly why this financial advice has stood the test of time.

Savings category four: General savings

This is where you can put money away for whatever it is you’re saving for: vacation, new-to-you vehicle, furniture… you get the idea.

If you are opening multiple accounts, ensure your bank allows you to do so for free. There is no sense in having them if you have to pay for them. Another thing to know when opening several savings accounts is that there is a limit to how many times you can transfer money OUT. The current rule is six times (Rule is known as Regulation D, established by the Federal Reserve). You can transfer IN all you want!

And this, my friend, is how to set up your bank accounts for success.

Here's to you!

Melissa Mittelstaedt

Money Coach | Accredited Financial Counselor®


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