Are you still using the checking account your parents set up for you? There’s no shame in that, but there might be a reason, or maybe four, to add another bank account to your financial strategy.
Whether you’re looking to combine expenses with your significant other, starting your own freelancing business, struggling with paying off debt, or just want to start earning interest, here’s some tips around how and why an additional account could help.
Splitting the cost of groceries, meals out, and internet bills with your significant other can get a little old, especially if you live together, but having fully combined finances in a joint checking account may not be right for you either.
Some couples choose a third road: keeping separate individual checking accounts and opening a new, joint account to pay for shared expenses like rent, bills, and food.
While you might be tempted to open a new account at the same bank you currently use, make sure you do your research first.
Once you complete your research and decide what features are a good fit for a new joint account, you can set up recurring shared expenses to debit directly from that account.
Many banks will offer each primary account holder a debit card linked to the account, which makes it easier to pay for joint expenses, even if you’re in different places.
Plus, having a separate checking account for yourself could help you keep track of personal spending. Whether you use your personal account to make student loan payments or pay for your weekly manicures and high-priced wine subscription box, keeping your personal money separate could help you stay on budget and might help to minimize money fights in your relationship.
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Freelancing or Business
One of the most common reasons people open an additional bank account is to manage business expenses. More and more people are choosing to either go full-time freelance or pick up a side hustle in addition to their full-time gig.
One of the more complicated aspects of managing your freelance work, however, can be dealing with the finances. After all, many of us are used to full-time staff positions where taxes and health insurance premiums are automatically deducted from our paychecks. Freelancers, on the other hand, are responsible for their own taxes.
Tax season can be made simpler when you have one checking account for payments and business expenses. You can use your business account to receive payments, pay for business expenses, and most importantly, pay yourself.
Keeping all your business transactions in one place allows you to easily access all the information you need come tax time, including the expenses you can write off and how much you paid yourself in income.
To set up “paychecks” to yourself, many banks allow you to create recurring automatic transfers to another account, even if it’s at a different bank. Once you’ve transferred that earned money from your business account to your personal account, you might have less difficulty separating the bill for brunch with friends from the business lunch with a prospective new client.
Some people even opt for two business accounts: one where they receive payments and pay for expenses, and one dedicated to saving a certain percentage of their earnings for tax time. That way, you’re not tempted to touch the part of your payments that will end up being paid in taxes.
Plus, if you keep your tax money in a savings account until tax season, you might be able to put your money to work earning more interest than it would in your plain old checking account.
Debt and Bills
If you’re struggling to stay on top of debt and monthly bills, having a separate account to cover those regular costs might be a big help. Setting up a separate bank account to hold the money you owe and pay out each month can help keep you from overspending—and it can also help ensure that you have enough in your account to pay your bills every month.
Let’s say you know that you need to budget in order to make a $300 student loan payment, pay a $50 internet bill, a $100 cable bill, a $10 Netflix charge, and, say, $100 in utilities every month, you might choose to put $560 in your second bank account every month to cover those costs.
You can also set up automatic bill pay directly from your secondary account so that you don’t have to worry about writing another check or missing another payment.
One major potential benefit to using a separate account for paying bills is that you minimize the risk of being overcharged because you know exactly how much should be coming out of this specific account every month. This makes it harder to miss an abnormally large payment or the continuation of a subscription you thought you’d canceled.
It’s never too early to start putting aside money for the future, and in a savings account your money can potentially earn more interest.
In taking some time to do some comparison shopping before making a final decision, you may just find that you’re able to secure a higher interest rate using an online cash management account like SoFi Money®.
SoFi Money has no account fees, unlimited ATM fee reimbursements, and you earn 0.20% APY on your cash.
Plus, SoFi Money has a new Vaults feature where you can create and customize separate folders to help you save for various goals. It allows you to separate your funds within your overall SoFi Money cash management account for different purposes.
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