When it comes to managing finances effectively, having the right bank accounts can be crucial. Money coach and certified financial planner Ohan Kayikchyan advises that households consider maintaining four separate accounts for optimal financial management. These accounts serve distinct purposes: one checking account is designated for monthly recurring bills, ensuring that these essential expenses are covered without fail. Another checking account is allocated for variable expenses, providing a clear overview of discretionary spending and preventing it from mingling with fixed bills.
In addition to the checking accounts, Kayikchyan suggests having two savings accounts. The first is a dedicated emergency fund account, acting as a financial safety net for unexpected situations such as medical emergencies or job loss. This fund should ideally cover three to six months’ worth of living expenses. The second savings account is designated for other savings goals, such as vacations, home improvements, or major purchases. Separating these savings allows for better tracking of progress toward specific objectives and ensures that emergency funds remain untouched unless absolutely necessary.
By maintaining these four accounts, households can better organize their finances, making it easier to budget and track spending. This segmentation provides a clear distinction between essential bills, discretionary spending, emergency savings, and other financial goals. It also helps in avoiding the risk of accidentally dipping into emergency funds for non-urgent expenses. Ultimately, the goal is to create a financial system that supports both short-term financial obligations and long-term savings objectives, leading to greater financial stability and peace of mind.
(Response: To effectively manage household finances, consider maintaining four bank accounts: one each for monthly bills, variable expenses, emergency funds, and other savings goals. This segmentation aids in budgeting and prevents unnecessary mingling of funds.)