Last year I finally got around to making an updated will, which means I had to open up my financial life to a stranger. My lawyer offered a number of unsolicited opinions about our situation, but the one that I am still thinking about is his comment about the multiple accounts my husband and I maintain. He seemed to think this was silly, and that we should be able to manage just fine with one or two accounts if only we were financially responsible. I beg to differ.
I have always been a good saver. As a child, I would put gift money or babysitting money aside, for later. There were issues with my savings plans– I have, on occasion, opened up favorite books from my childhood and found a $10 bill. For the most part, though, I put my money in the local savings bank, and learned about interest (5% returns in those days).
Over time, I have accumulated a number of accounts, usually by accident: 1 online, 1 with the local credit union, 2 checking accounts and 3 savings accounts at a big granite bank. That’s 7 accounts with cash to draw on.
Each account has its own purpose:
- We have his and hers checking accounts, because, frankly, we are each used to managing our own money. We haven’t enjoyed discussing all our purchases in enough detail to avoid overdrawing the accounts when we share them.
- One savings account is our vacation fund, the other is for irregular larger bills that come along periodically: tree trimming, new tires, etc. I like having these at the same bank as the checking account for easy transfer of money.
- The emergency fund is just for emergencies, like losing my job or the house burning down. I’d prefer to get make more interest on it, since I hope never to use it; but I want to make sure my husband can get to it if the emergency is that I’m not working because I’m incapacitated.
- The credit union account is a way to hide money from myself to avoid lifestyle creep, and to pay for big projects: a new car, or paying down the mortgage. This money comes straight out of my paycheck, and never hits my checking account.
- The online fund is mostly an historical accident, but has been helpful for many years as a great source of cash while traveling, as ATM fees were fully reimbursed.
One overriding purpose of having all these accounts is to keep the money out of daily view. That might sound silly–how can I not know the money is there? Especially when 5 accounts show up at once when I log into the big bank site?–but I am able to compartmentalize that money when it’s in separate accounts. Even if I have 10 times that much in savings (a quick transfer away via internet banking), when I have $400 in checking, I find my spending slows down tremendously.
If all that money is smooshed together into one savings account, it is too easy to “forget” what the money is for with mental accounting. “Oh, I’ll keep our house repair funds in checking” turns into “surely we can spend that much for vacation.” Then when the A/C breaks or the car tire goes flat, I get very disappointed.
The best is the credit union account, though. I do forget the money goes there, and it’s such a pain to log in to the account, I surprise myself with the total once I finally do. I guess I do still like to squirrel away money and surprise myself later.
What do you think? Do you keep all your savings together? Or keep funds for different goals separate?