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    The adage “Don’t put all of your eggs in one basket,” has never been truer when it comes to managing your finances. Putting all of your money in just one bank account may seem easier to manage, but it can also be overwhelming once the expenses pile up. 

    “If you don’t divide your savings into separate specific accounts, there is a bigger chance that you will spend funds that are allocated for another purpose,” says bank manager Eleanor So. “Having separate accounts will give you a clearer picture of how much you really have, how far along you are from your financial goal for a [particular] account, and if you are able to stay within budget.”

    There is also the security risk that comes with keeping all of your money in only one place. “Most people’s savings accounts are also their ATM accounts,” adds So. “If their ATM card gets stolen or skimmed (i.e., the card’s data is copied, allowing someone else to access it even without having the actual card with him), they may lose the bulk of the money in that account.” 

    Here are five accounts your family should have:

    1 Family checking account
    What it's for: Monthly bills (e.g., utilities) and other major expenses, such as tuition fees
    How much to put in: This is where your entire month’s paycheck goes. The money that is left at the end of the month [after paying all of your bills] is the one that you use to open all of your other accounts.
    Take note: Exercise caution when handling this account. “Always make sure you have enough funds in this account to cover your checks. Otherwise, you will incur overdrafts, which will result in penalties from your bank,” advises So. Registered financial planner Joseph Anthony Peralta adds, “A good idea is to link your bills to this account and subscribe to the bank’s auto-debit or auto-pay function. This way, you can always pay your bills on time.”

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    2 Family Savings Account
    What it's for: For everyday expenses such as groceries, entertainment, and dining out
    How much to put in: Whatever the amount, remember that your expenses should not exceed 20 percent of your take-home pay. 
    Take note: Make this your ATM account so you have easy access to cash. “Sit down with your spouse and agree on what falls under minor expenses (e.g., monthly mobile phone bills) and what makes up major expenses (e.g., a new mobile phone). Major expenses must be subject to discussion before purchase,” says Peralta.

    The first two accounts mentioned above will require you to do bank transactions often, while the next three should be accessed as sparingly as possible.

    3 Emergency account
    What it's for: For large, unexpected expenses, such as hospitalization and major car or home repairs. “These are the savings you hope you’d never have to use,” says Peralta.
    How much to put in this account: Your monthly expenses multiplied by six.
    Take note: Of the three “untouchable” accounts, this is the first one that you need to fill up before you open the next two accounts. It should be put in a regular savings account so you could easily withdraw funds when the need arises. If you withdraw from this account, make sure to replenish it right away. “Open with a bank that’s different from where you have your day-to-day savings account so you're not tempted to use it for non-emergency purposes,” says So. 

    An emergency account should also be separate from your retirement fund. “If you’re suddenly unemployed before your retirement age (e.g., you are laid off), you should dip into this emergency fund (and not your retirement fund) to tide you over until you find a new job,” says Peralta. 

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    4 A retirement account
    What it's for: This is your nest egg when you retire. 
    How much to put in: “By the time you reach retirement age, you must have already saved eight times the amount of your current yearly income,” says Peralta.
    Take note: To grow your money in this account, consider making sound investments. There are many options available, from short- to long-term, from low- to high-risk. Ideally, once you retire, you should be living off the dividends of your investments with the principal amount barely touched. To fill up this account, start with small amounts—whatever you can spare. When you have a better hold on your finances and, hopefully, start earning more, then you can put in bigger amounts. 

    5 A vacation or "fun" account
    What it's for: This is where all your extra savings goes to be used for little luxuries or rewards such as a family vacation or a new car.
    How much to put in: “To compute how much you need to save every week or month, take the total cost of the vacation, and then divide it by the number of weeks or months until your planned vacation date,” says So. 
    Take note: This account requires early planning and some research to know how much you need to save. “You can invest the money in a short-term time deposit, where you can gradually make additional placements. This allows you to earn extra savings and also discourages you from withdrawing money from said account,” says So.

    This article first appeared in the August 2015 issue of Smart Parenting magazine. Minor edits have been made by Smart Parenting editors. 


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