Budgeting expert reveals why everyone should have FOUR bank accounts (2024)

A budgeting expert has revealed why the key to building up a personal fortune is opening up four bank accounts that you should use for different financial gains.

Andrew Peek, a finance expert based in the US, frequently shares his best kept money secrets on his TikTok channel.

With the number of Americans who don't have bank accounts falling to an all-time low, the financial advisor is on a mission to teach his followers how to become financially free with the help of the bank.

In a recent video, the money coach detailed the importance of setting up four different bank accounts to become more financially responsible.

'There's four bank accounts that you need in your life,' Andrew said before adding that his followers 'need' to set up these accounts and that they will 'thank' him later.

An easy and accessible way to spend and make payments! Open up a checking account to become for financially responsible

A 2021 study from the Federal Deposit Insurance Corp. found that 4.5 per cent of Americans - representing nearly 5.0 million households - were without a bank account.

The study came as shock as it was the lowest level to have been recorded since the FDIC began tracking bank account data in 2009.

With the study in mind, Andrew revealed why everyone should have four bank accounts, beginning with a checking account.

'First is a checking account, this is where your paycheck goes, and this is where you are going to spend from,' the financial advisor revealed.

A checking account is designed to give you easy access to your money, while keeping it secure.

You can make deposits and withdrawals regularly, if you prefer cash.

It is one of the most common types of accounts, with over 91 per cent of Americans holding the traditional account.

Since checking accounts are insured by the FDIC, you can have financial safety, easy access to your funds, and financial peace of mind.

Storing large amounts of cash is huge risk to you and your family, making a checking account a safe option to store your money.

A checking account also makes it easier to deal with checks, pay bills, and manage your money.

Paying bills or expenses in cash runs the risk of the payment not being tracked or filed correctly, meaning if a company rejects your payment, there is no way for you to prove you sent a payment in the first place.

However, with a checking account, you always have a paper trail for every purchase or payment you make.

Additionally, a checking account offers no transaction limits, so you are never limited in terms of withdrawals, payments, checks, or money transfers.

A checking account give you the most financial freedom and is the go-to option for your number one type of account.

Save it for a rainy day! Allocate money into a savings account in case for emergencies

The second type of account the money expert advised his followers to have was a savings account.

Andrew said: 'You need a savings account, this is your rainy day fund.

'You don't need that much in the rainy day fund but you need enough where you need to be able to cover life or s*** happening.'

He said that throughout the year you should be putting money aside for taxes, explaining that the cash saved should also be put into your savings account.

Similar to a checking account, savings accounts provide costumers with a way to keep their cash stowed away in case of an emergency.

Since these accounts are meant to help you save money instead of spending it, if you decide to withdraw an excessive amount, you may be subject to a withdrawal fee.

Because you can't access all of your funds at once, a savings account can be a great way to help you save up for college, a car, or any other major expense.

They are also a great way to establish an emergency fund to cover any unforeseen medical expenses, gaps in employment, etc.

An emergency fund should include three to six months' worth of expenses and take into account costs such as utility bills, food expenses and housing costs.

Invest in yourself! Open up an entrepreneurship account to help build your brand

The third type of account the financial expert revealed you should have was one that often gets forgotten.

'People don't think about this but the best way for wealth building is to start something, your own project, your own business, your own side hustle, whatever.

'You need an entrepreneurship fund so you can get basic things off the ground, like go to an event or conference, make yourself a web page.

'Whatever it is, you need an entrepreneurship fund, because your entrepreneurship fund is probably what's going to help you build wealth the fastest,' Andrew explained.

The budgeting expert has previously detailed the importance of investing in yourself, which an entrepreneurship fund will help with.

'The best investment you can make is yourself,' he explained.

Andrew said that you can increase the success rate of investing in yourself by making 'more and more decisions' that put you in 'all kinds of responsibility where people are relying on you to make a decision.'

He explained that setting up an entrepreneurship fund is a huge part of investing in yourself and planning for your future because it helps you expand your brand.

Plan for the future! Make sure to have a retirement account to set yourself up for post-work life

The last type of account the budgeting expert advised everyone have was a retirement account.

'You do want to have a retirement account, this can be like a ROTH IRA, 401(k), but you need something.

'Call me crazy, but I don't think that the structures we have in place today are going to take care of your retirement for you, so you got to take care of it for yourself.

'And if that's the last one you start to fill up, no problem, but just make sure you have it there just so you know you have got a responsibility to it,' Andrew explained.

A retirement account is intended to provide you a substantial amount of income after you stop working.

If you don't put money aside, you will have no other option than to keep working past the 'traditional' retirement age, because it's unlikely that Social Security will be able to provide you with a enough money.

There are two basic retirement accounts as defined by the Employee Retirement Income Security Act (ERISA): defined contribution plans and defined benefit plans.

A defined benefit plan offers an employee a specific monthly amount at retirement and is also known as a pension.

Usually, you will have to work a certain number of years to qualify for these benefits.

Contrastingly, defined contribution plans don't ensure a specific amount at retirement, instead the employee and the employer contribute to these funds. When the employee retires, they will receive the balance in the account.

These plans include 401(k), 403(b) plans, and Employee Stock Ownership Plans (ESOP).

Another form of a defined contribution plan is an Individual Retirement Account (IRA).