I wrote a few weeks ago about my Saving by Delusion savings plan. It got me thinking about the different types of bank accounts and how we use them, so I thought I’d share that.
In our family we have several different types of account. We have two regular, no-frills checking accounts, a money market account and a statement savings account. Son also has a passbook savings account.
REGULAR CHECKING ACCOUNTS
Our regular, no frills checking accounts have no minimum balance, but also earn no interest. The interest rate on the interest-paying accounts is so low we’d rather put the bulk of our money where it will get a better return. Husband’s paycheck is automatically deposited here into this, our main no-frills account, and I use this account to pay most of our bills. Most bills are on automatic debit, which helps me stay current, avoid postage and pay as late as possible yet be on time.
The other no-frills checking account is an account we set up after we first married for Husband to have some spending money that is “just his” to use without even thinking about. Since I handle our day-to-day finances I thought it important to make sure Husband didn’t feel like he had to check in for every purchase. After being married awhile he realized he didn’t really want or need it, so it wasn’t really being used at all.
Husband’s Checking found new life when I started selling things on Ebay. I wanted to be a verified seller but I didn’t want to give Ebay access to Main Checking, as I’d heard they sometimes freeze accounts if there is a complaint. There was no way I was going to let that happen to an important account. So I used Husband’s Checking when I signed up for Paypal, and as there’s never more than $100 in that account we won’t really be affected if there is a problem. Money is transferred out of that account as soon as it’s electronically deposited. It’s a perfect solution for us.
Son has a passbook savings account. That’s the one where you have the little book, and it has to be stamped each time you make a transaction. There’s good news and bad news about a passbook. Taking money out of a passbook savings account is a bit of a pain, as you have to have the passbook with you, and you have to actually go inside the bank (well, not anymore, but I pretend I don’t know that).Because it is such a production I’m less likely to make withdrawals. When Son gets older I think this account will be perfect to start him along the road to Saving by Delusion, too.
For short-term savings I use a regular Statement Savings account. Access is much easier with this account. Since our checking accounts earns no interest I need somewhere to park money temporarily, yet still earn a little interest. Because I’m not limited in the number of withdrawals I can make I can transfer money into and out of this account at will.
All money that does not come from Husband’s paycheck gets deposited into this short-term savings. Any survey money, Craigslist/Ebay money, Health Savings Account reimbursements, gift money (except Son’s) – any extra money at all – goes here. If I know I’m making a large deposit that will need to soon be in my checking account I’ll park it there for a few days and make a few pesos (I do not go to the extreme of transferring money from savings into checking for each check – that’s just too labor intensive).
I also pay my mortgage from this account. I’ve always done this because I wanted to make sure that even if I made an error in my calculations that check would never bounce (I’ve never had that happen, but it’s always made me feel better). And as it works out I usually have enough money in miscellaneous income to pay my entire mortgage.
Technically a checking account, we use our Money Market for our long term savings. At the end of the month any money that’s left over in Main Checking, Husband’s Checking or Statement Savings goes into this long-term savings account we pretend we don’t have. They limit the number of withdrawals we make per month, but deposits are unlimited. It gets a higher interest rate than the Statement Savings, so this is why we use it for our long term savings.
I’m very reluctant to withdraw any money from this account. Another of my Saving By Delusion tactics has me pretend that this money isn’t here, even if it’s earmarked for something specific. Let me explain how my crazy mind works…
If we’re making a large purchase and I know some long term savings money is going to be used to make the purchase, my goal is to take as little as possible out of long term savings as possible. For example, when I bought Husband’s new $4000 MAC I only wound up taking about $2000 out of the $4000 needed for the purchase from our Money Market Account to do it. How? I saved in other areas and used miscellaneous income to lessen the blow to our long term savings. Now that Husband has used proceeds from his freelance work to pay back this account for his computer we’re about $2,000 ahead of where we were before we bought it. But please don’t tell Husband.
I’m sure there are better places to put our long term savings, and I’m equally sure that there are more efficient ways to manage money. This is what I’ve done and it’s worked for us so well we’re able to live comfortably on Husband’s very mediocre salary, I’m able to stay home with my son and we have a nice chunk in savings. So until I grow enough kahunas to take our money out of it’s nice, safe Money Market, this is it.