bank accounts Archives - Kids Ain't Cheap

I recently went out on my own and started a financial consulting and bookkeeping practice. As the primary (and sometimes only) breadwinner for my family, this has thrown a bit of a wrench in our personal finances. Not only am I not getting a regular paycheck every two weeks, but I lost my employer-subsidized insurance and a 401k match.

Getting Financially Organized

I’ve spent the past few months researching our options for health insurance and identifying the best options for our retirement savings. I’ve also set up a process to make sure I save the appropriate amount for federal and state income tax because I don’t have an employer withdrawing it from my paycheck for me.

These changes were all things I was expecting. What I hadn’t realized the importance of was organizing our cash so it wasn’t all sitting in one big pile. To solve this, I set up multiple bank accounts to organize finances.

Given that my self-employment income is variable, and that my largest client pays me once a month, having separate bank accounts to disseminate my cash to is critical. If I keep it all in one account, including my tax estimate, I will be tempted to spend it. I know myself too well.

I’ve re-organized the flow of our family’s cash into five bank accounts. Each account has a designated purpose that allows us to optimally manage our money. The five bank accounts we now have are a family checking account, an emergency savings account, a family savings account, a medical expense savings account, and a flash cash account. Separately, I have a business checking account and a tax account.

Family Checking Account

This is the primary bank account. All money comes and goes through this account. I transfer cash from my business checking account once a month to the family checking account. My husband’s paychecks are also deposited here. All bill payments are drafted from this account. Money is transferred to our other bank accounts from here, all via automatic draft.

Emergency Savings Account

We have an emergency fund in place to cover unplanned events such as home or car repairs, but mostly I’m always worried about an emergency trip to the veterinarian. We have a mischievous Great Dane, along with a few other critters. I don’t want to find myself in a position of saying no to a life-saving surgery because we don’t have the funds.

Family Savings Account

I funnel funds for everything we want to do that requires some savings over time. Things such as the next family vacation to Walt Disney World or Myrtle Beach, season passes to the museum or a new SUV.

It’s also our rainy day account.

Health Savings Account

While not a traditional bank account, we set up a health savings account. A Health Savings Account (HSA) is an account specifically for health-related expenses. It’s tax-free and typically has a debit card assigned directly for payments from the account. The benefits of an HSA include the contributions and any earnings are tax-free and it can be rolled over into the next year.

Monthly, we are transferring cash to the HSA to cover future medical expenses.

Flash Cash Account

Otherwise known as a slush fund or fun fund. All our money left over after bills goes here. This money is used for date night, my Chai Tea Latte addiction, and money for all the fun things.

Sadly, it’s also used for not so fun things like the toilet seat cover we bought last night.

P.s I just heard about this great new fintech app called Astra.finance. Basically Astra is a smartphone app that lets you automatically move around between your accounts. This kind of thing is great if you have a steady income. You can pretty much set up some rules and forget about moving your money. It works for both checking and savings accounts.

Does your family use multiple bank accounts to organize finances? Let us know in the comments below.

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Why We’re Opening a Bank Account For Our 3-Year-Old

Next week my husband and I are going to our bank and opening an account for our daughter who hasn’t yet turned four. While some may think at three she doesn’t really need her own bank account I argue it’s never too early.

Since she first got her own piggy bank, for her first Christmas, she’s been collecting coins wherever she can find them and placing them in her Cinderella bank. Though they’re mostly small coins, until recently I didn’t realize how many she actually had. It sits on her shelf where she drops the coins in when she finds them. Yesterday I opened it to have a look to realize she’s almost out of room! I explained that soon we will need to work together to roll the coins and take them to the bank. Though she likely only has about $10-$15 it’s something and I want her to understand the importance of saving.

More than the piggy bank, a child has their own set of expenses. For us, its ballet and soccer plus the normal kid stuff like growing in and out of clothes way too fast. Until now we’ve just been providing these things out of our account but I like the idea of her having her own account to pay for all her expenses separately. Rather than us just pay for everything when it comes up, instead we will be putting money into her account to pay for these expenses. It helps us budget better by separating her stuff from ours and is helping her learn the value of money at an early age.

I think having an allowance is important for a child. Though my three year old doesn’t yet understand that we’re essentially giving her a bi-weekly allowance, it’s exactly what we’re doing. Just like adults, there will be required ‘’bills’’ to pay from her account, in her case registration fees and uniforms, but the ‘’extra’’ will be hers. Obviously she isn’t going to walk into her dance studio at four and pay her bill, we will with the money in her account, which we’ve placed there. As she gets older though she will have more say in the account and as well expectation to open a separate strict savings account (on top of the post-secondary savings account we also contribute to).

These are lessons I never had taught to me and I wish I understood the importance of saving early and often sooner than I did. I have vague memories of the local credit union coming in to collect our change in elementary school and balance our account books in the hallway but never really understood why we did what we did. I didn’t realize the foundation it was attempting to lay.

I’m not suggesting that by opening an account at three, our daughter will go through life not making any financial mistakes, there’s no doubt in my mind she will, the difference between her and I though is that she will know the difference when it happens and be able to correct them much sooner which is exactly what I hope to accomplish.

How old were your kids when they opened a bank account?

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