If the way you bank seems a bit random or haphazard and the accounts you use have just evolved from your very first school banking account there is a good chance you are making things hard for yourself and losing money.
You should have a structure to your banking. Keep the structure as simple as you can. Every account should have a purpose. Make sure you are getting a good deal on every account.
Here is our view of the ideal banking structure for those of us that don’t have a mortgage:
It might look complicated but it’s pretty simple. You need a Transaction Account that you can have money paid into and pay money out of. These accounts offer a lot of flexibility but usually pay little or no interest. You get paid into this account and then you move money from here into your Savings Account (more on this later) or into your Bills Account (if you have one). If you have no Bills Account you transfer money from your Transaction Account to your Credit Card as required to pay it off. You put any excess cash you have into your Savings Account. You want an account that pays you the highest rate of interest you can find. You’ll probably also want a Credit Card, which if you use sensibly can be a free source of short term credit. Charge all your expenses to your card and then pay off the card each month. If you want some extra discipline set up a Bills account and each time charge something to your credit card transfer enough to pay for it into your Bills account. Alternatively, don’t get a credit card and use a debt card instead.
For those of us that have a mortgage things should be a little different. Here’s our ideal banking structure for someone with a mortgage.
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