4 Different Types of Bank Accounts Everyone Should Have

Have you ever wondered how many different types of bank accounts you should have? Some people think that having separate bank accounts is a lot of work. If you are learning how to budget for beginners, separating your accounts can be a great tool.


I feel like it’s better because it’s a way to separate your money. If you make your access to your money smaller, you will spend less. So if I separate out my money into separate accounts, I’m not seeing all of my money at once.


But, I can also see exactly how much money is truly available to me for what bills and expenses.

I’ll break down the four bank accounts you should have and how they can help you better manage your money. Three accounts will be checking and one will be savings.


I suggest your checking accounts be held at one bank and your savings account be held at a totally different bank or credit union because you do not want to mess with that long-term savings money.


Account 1: bills and income checking account

This account is where your direct deposit will come in. Any money you make will go into that account. This money in this account is designated to pay your bills.


A bill is a rent or mortgage payment, car payments and car insurance, electric, phone, cable, Netflix, Hulu–anything with a due date on it. By doing this, you reduce the risk of mixing funds, which can result in overdraft fees and late bills. You can put your bills on autopay so you don’t miss a payment.


You won’t have to worry about accidentally using the bill money for expenses or impulse shopping because you’re not even using a debit card or swiping any card from your bills account.

Calculating expenses

Account 2: expenses checking account

An expense is anything you spend money on that does not have a due date. This includes groceries, gas, eating out, beauty items, shopping, pet care, back-to-school supplies, and anything for your kids.


This will be the only debit card you will carry around unless you pay for expenses using the cash method.


When you look at your bills account, you will know all that money is spoken for. When you look at your expense account, you will know that money is allocated and you can spend it without worrying if it will eat up your rent money, for example.


Account 3: sinking funds checking account

Sinking funds are expenses, but not the kind you spend money on every month. A sinking fund can be for donations, car maintenance, vacations, gifts, or the like–things we don’t do or need every month.


It’s an expense you’ll spend money on in the future that you are saving for now. You will transfer bits of money into this account. When it’s time for you to spend it, take it out in cash or transfer it to your expense account.


Account 4: long-term savings account

This is a long-term savings account for something big that you may need a year or more down the line.

Opening a bank account

How to allocate to accounts

When you get paid, you immediately allocate the money. As an example, if you get paid bi-weekly, half of the check will be money for your bills account.


So let’s just say your bills are $2,000 a month. Put $1,000 into your bills account, then the other $1,000 will be allocated to your other three accounts. Have a money date with you every week so you can manage these accounts.


A word about cash envelopes

If you are doing cash envelopes for expenses, you don’t need a separate account. All you need to do is take the money out of your main account when you get paid. If you do want to use cash envelopes, these will be used for expenses.


You can take the money out of that main account and use the cash. So say your expenses for the month will be $1,000. Take the $1,000 out in cash and put it into your cash envelopes to cover expenses. But you can’t always pay for expenses in cash–like if you order something online.

Cash envelope

Different types of bank accounts

Having four accounts helps you to see your money in a different way when separating accounts. This four-account system allows you to allocate your funds appropriately, reduce your impulse spending, and keep you from going over the budgets that you set for yourself.


What do you think–are these four accounts good budgeting tips for beginners? Let me know in the comments if you think this will work for you or if you have other types of accounts you separate your money into.

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  • Carolee Carolee on Jun 30, 2023

    These are great ideas. I've been doing this for a while, because I was getting older and wanted to keep things straight in case I forgot something. It's nice to know that it's good for everyone. I would add that a credit card for your expenses that pays you money back to your account is a good idea too. But that is only if you pay the balance every month. And your bills can be set up to auto-pay. Makes life easier.

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