Organising your finances with separate bank accounts

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We all know that managing money can sometimes feel like trying to wrangle a herd of cats. But fear not, because we've got a game-changing strategy that's going to make budgeting a breeze. Say hello to the magic of separate bank accounts! Simple – yes, yet effective.

In this blog post, we're going to spill the beans on why having different bank accounts to manage your money can be a total game-changer for your personal finances mojo and help you achieve your financial goals.

If you’ve read our how to build a budget blog, you’ll know that segregating your monthly income into separate pots or buckets as I like to call them, is one of the best ways to know where every penny of your money is going. Not only that, it also helps you to pool money away for designated uses, helping you to save money along the way. We’re going to take you through this triple bank account strategy and the best bank accounts to have that can become the core of organising your finances. You can build outwards from this when you’ve become a little more advanced, we’ll include these options at the bottom of the blog.

Whatever your financial situation, this simple organisation strategy could help you out, so let’s jump to it.

Account number 1: Current account for everyday spending

Alright, let's kick things off with the current account. This little gem is your go-to for everyday spending. It's like your trusty sidekick, always ready to tackle that coffee craving or spontaneous shopping spree. This account is for you, with money to spend on you. When choosing a current account, keep your eyes peeled for zero or low fees, a snazzy mobile app, and ideally some cash back perks. Convenience is key, so make sure you've got easy access to withdraw your money if you need cash, and are able to add your card to your mobile wallet. You’ll also want online banking that's as smooth as silk, we’ll talk more on online banking below.

Your current account is the bank account your salary will most likely get paid into, so make sure to set up those bank transfers after pay day to move money allocated to other buckets out of this account. Get in the money mindset of having this for your day to day spending.

Read our guide on the best current accounts 2023!

Account number 2: Bills Account – Set it and forget it!

Now, picture this: a stress-free life where bills magically pay themselves. Sound like a dream? Well, dream no more! Say hello to your bills account for living costs. This superhero account is all about setting up direct debits for those pesky bills and monthly expenses. Rent, utilities, Netflix, you name it. By keeping these expenses separate, you'll avoid any surprise "oh-no-I-forgot-to-pay-that" moments, (trust me, I’ve been there) and you won't be checking your bank balance constantly to see if you can afford to pay for something before your bills come out. Whatever monthly financial obligations you have, set them to come out of this account, and use this account alone for paying bills. And yes, this includes any debt you need to repay.

If you’re new to segregating your accounts, start with this and ensure everything is automated smoothly. There is another way to do this which I personally tend to favour, which I’ll talk more about below.

The most important thing to remember here is this is your ‘serious’ account, if you’re not being super strict with your budgeting plan, you need to at least be super strict with this. This keeps you out of debt and keeps that credit score going strong, so always ensure this account is kept up to date and funded.

Account number 3: Savings account: Where dreams take flight

Ah, the savings account – your very own treasure trove. A good savings account can help you reach both your short and long term savings goals, especially if you use it correctly. Here's the real secret sauce: interest rates. When scouting for the perfect savings account, go for ones with the juiciest interest rates. Look for flexibility, accessibility, and maybe even a nifty app that lets you track your growing stash as you save money. Remember, the higher the interest rate, the more your money will grow, but these also come with some restrictions.

For example, if you want the higher interest rates, you may need to go outside your usual bank. Or, you may need to lock your money up for a certain amount of time. There are hundreds if not thousands of different savings accounts you can choose from, depending on your circumstances. Always read the fine print, and understand the rules of gaining the interest before opening one.

We have a free guide on everything you need to know about savings accounts available here. Have a read to help reach your savings goals in no time.

So we’ve got the banking accounts down, these are the bare minimum we believe everyone needs to manage your money. You could choose to have more if you have other categories, it's totally up to you, but we would suggest that in this day in age, ensure the bank accounts you choose have a good digital backing.

Digital Banking

Digital banking is your financial fairy godmother. Imagine having all your accounts at your fingertips – instant access, 24/7. Mobile apps are like having a personal finance coach in your pocket. They track your spending, wave red flags at overspending, and shoot you alerts to keep your budget on point. If you have all your accounts with the same bank, you can see everything on one convenient app. When looking into bank accounts, I recommend looking at reviews of their online app and customer service levels, as this is important for your own convenience.

Another important factor is financial security. Many banks have now adapted a ‘confirm your transaction on your app’ stance. This is one of the latest cutting-edge features in mobile banking and the way forward, ensure the bank you choose has put time and effort into making digital banking as safe, easy and convenient for their clients.

Want to take it one step further?

If you want to make your money work harder for you, there are alternative ways as promised earlier in this blog post. We’ll start with the bills account. If you cannot find a current account that gives you the benefits you crave for paying your bills such as cash back or points, there are alternatives – credit cards. I know, credit cards can strike fear into the heart of many, and for good reason. It’s important to say that if you are thinking of opening a credit card, you should be prepared to pay it back in full every month to avoid any interest rate charges of late fees. I personally use this method, so let me explain how I do it.

All my food shopping, my petrol/gas, and my bills are all paid via my credit card. As these bills are paid via supermarkets and utilities companies, many of them have partnerships with banks that offer rewards to their customers paying for goods in their establishments using their credit card. This is a win win for both banks and businesses, the businesses like Tesco for example get the bank’s customers to spend money at their shop, the banks therefore, get the benefit of giving their customers cash back or sometimes double/triple points for going to Tesco. On the back of this, the consumer (us) also wins, as we get the benefit of the banks perks. If you shop at Tesco anyway, why not do it via a partnered bank and get some reward in the form of cash back of vouchers?

The above was just an example, different credit card operators and banks offer different reward types. Some offer direct cash back, some offer retail vouchers, some offer rewards in the form of airport lounges, money off car rentals, etc. Some credit cards also offer flying miles with partnered airlines. There’s a range of benefits available, and this is done to encourage you to spend money to keep the economy moving.

As I said before, if you’re taking out a credit card you need to keep your wits about you and monitor your spending habits to ensure to avoid credit card debt. Always pay your bill off in full, and on time so you're not charged heightened interest rates and don't get into bad debt.

Money management tips for credit card spending

Use your credit card like a debit card. If you don’t have the money in your account, don’t spend it on your credit card. You still need to repay it, it’s not free money, it’s just being spent on a credit card to make the money work a little better for you, but stay vigilant.
Pay your credit card off in full every month, no exceptions. This way, you’ll avoid any unnecessary fees and still get the rewards.
Read the fine print before taking out any credit card. Some credit cards ask you to spend a minimum amount, some need you to earn a certain salary, others may have different rules. Spend some time choosing a credit card and compare different ones. Our free guide to choosing a credit card and what you need to know is here.

If you use your credit card to pay your bills and do your weekly shop, pay it off in full at the end of every month out of your designated bills account. The money in that account is still being used to pay your essentials, you’re just adding a layer on top to redeem more rewards.

Multiple savings accounts

Another way to enhance your savings is to split your savings into multiple savings accounts. Savings accounts come in all shapes and sizes, and we mentioned above the different interest rates and benefits of the many types, such as fixed interest, variable interest, fixed term, easy access, plus more.

Get our complete guide on savings accounts and how to choose the right one for you.

The easiest way to split your savings, is by short and long term goals. If you have a long term goal, and know you would not be touching that money for a certain amount of time, you can lock it away for a higher interest rate, in a fixed term savings account. These accounts can sometimes reach up to 5% interest per annum.

However, if you need an easy access accounts, a lower interest rate or other benefits may be available. You could keep your emergency fund in an easy access account for example, or money for your other shorter term goals.

Consider having multiple savings accounts for your different goals – that dream vacation in Bali, a cozy emergency fund for a rainy day, and your 5 year house deposit plan.

So there you have it, by wrangling your moolah into separate accounts – the current account for splurges, the bills account for autopilot bill-paying, and the savings account for making your dreams come true – you'll be a budgeting ninja in no time.

Embrace the digital banking revolution, explore cash back magic, and watch your finances flourish like never before. You've got this, and your financial future is looking brighter than ever!

Disclaimer: Important Notice Regarding Financial Blog Content

The content on this financial blog is for informational and educational purposes only and should not be considered as financial advice. The authors are not licensed to provide financial advice in the UK.

Please consult a qualified financial advisor for personalised guidance. The information may not always reflect the latest regulations or market conditions.

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For tailored financial advice, consult a licensed professional in the UK.

Organising your finances with separate bank accounts – best bank accounts to have