As a CPA, I know how important it is to have your finances under control.
Even though I have been trained to use complicated strategies to managing money, I don’t actually do anything complicated when it comes to my money.
In fact, there is one thing I recommend that everyone do that is quite simple, but I don’t think many people do it:
Open a second savings account
Before you say, “That’s stupid” and leave because you’re angry that I made you come read this post to find out my super secret tip, hold on a second!
Let’s look at the reasons why I recommend this.
Why should you have two savings accounts?
- This protects you from over drafting your checking account without dipping into savings set aside for true emergencies like a job loss.
- It helps you pay for unexpected expenses like car or household repairs without using credit cards.
- It gives you peace of mind so you don’t have to always worry about money.
Let Me Explain
Most people I know have one savings account, but we have two. We keep the first one topped off at $10,000.
That’s the amount we’re comfortable we make our essential bill payments with (mortgage, insurance, etc) for several months if my husband were to lose his job.
Our second account is a savings account we also like to keep at around $10,000, but it’s one we’re allowed to use to fund unexpected things like an air conditioning replacement, car repairs, donations, etc. It allows us to be flexible with our spending and absorb rather large expenses without touching our credit cards.
The best thing about having a second checking account is the flexibility it gives you with your finances. The ONLY time I ever stress out about money is when our secondary savings account starts to get low.
But you know what I do then? I figure out ways to make more money so we can top it off.
Do you have a second savings account? If not, what do you think of my idea?
Continue the journey >> The Second Best Thing You Can Do for Your Finances
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Natasha says
Yes I do! Opened one a few months ago and the benefits are amazing. It feels good to have it as a backup account instead of having to use my main savings account or credit card. I agree! Everyone should do this. Great tip!
Lena Gott says
Thanks, Natasha!!
Virginia says
I actually have 3 checking accounts–Emergency Fund which has 6 – 12 months of expenses worth in case of a job loss or leg falling off. Bill Paying Account which has a month’s worth of expenses and a Savings Account which is for a new car, house, etc.
Lena Gott says
Interesting! How does your Bill Paying Account work? Do you deposit part of your paycheck into it each month?
Larissa says
Awesome! I do something very similar but I am old school. I still write checks, keep up with my balance, and budget out of a spiral notebook. I make a deposit into the back page if my checking account every 2 weeks. Then I have that cushion in my checking account. It can be used for emergencies and when my balance gets higher I transfer some to my savings account or look at an IRA. Love your blog!!
Lena Gott says
Thanks, Larissa! I’m glad you like my posts. Stop by again sometime!
Suzi Whitford says
Hi Lena! That’s a great tip! What other savings or retirement accounts do you invest in as well? We have our ‘cash stash’ – (in your terms the first savings account) and then a bit of cash in another account. And a 401K for hubby, an IRA for me, and two ROTHs. We’re also putting away money into an HSA and a college fund for the little ones. Do you have a detailed post on this topic? 🙂
Leeanna says
Wow! We do good just trying to keep 20.00 in our savings. Due to the fact of having regular average monthly bills and raising 4 teenage boys, all driving now. It would be a God given miracle for us to have two savings each with 10,000.00 in them. All six of us have jobs that pay above minimum wage. We do good enough just to keep bills paid, food on the table and gas in our vehicles.
Lena Gott says
Hi Leeanna – I am here to answer questions you have about ways to make it happen. I know it seems impossible at first (it seemed that way to me!) but with a solid plan and a few years of executing that plan, and I think you could get there!
Holly says
A second checking/savings account would be great if you have 2 incomes but when you have only one it is kind of hard to manage that. What does a single person do?
Lena Gott says
You can have two savings accounts as a single person. The amount going into the main account doesn’t matter as much as the fact that you are intentionally putting some of that into your secondary account to build up your savings.