Nov. 5, 2022

Setting Up Your Money System

Setting Up Your Money System

In Ep.12 Your Money Management System, I talk about the steps you can take to get your personal financial system in order. In this blog post, I will explain a few thought-provoking considerations to kickstart your personal finance journey!

Who will you bank with?

The first thing you must decide is who you will bank with. I want to stress this because people don't realize that picking your bank is kind of a big deal. You are limited to the types of products that they offer and the types of terms and conditions that they have on their financial products. So it's really important to decide who you're going to bank with. And you don't have to pick one bank. You're allowed to have as many bank accounts as you want. I am not loyal to one bank at all. I have several bank accounts, and that's based on my personal needs that I've determined.

So, what are your options? Well, you have your traditional banks. In Canada, you have the Big 5 Banks (e.g. Scotiabank). You have credit unions, you also have fintechs or online banks (e.g. Tangerine) that also exist. So you have to determine, based on the characteristics of those institutions, what works best for you.

For example, I'm a big online banker, so Tangerine, EQ Bank, and KOHO. Those are my bank accounts. I use my Tangerine account as my chequing account for my payroll and to pay off my credit card. EQ Bank is all about savings; it is home to my sinking funds and emergency fund. Finally, My KOHO account is for all my fun spending. 

That might not be what works for everybody else, but that's what works for me. I love online banks because there is either limited or no fees and you still get the same or more perks. So whether that's higher interest rates on savings and chequing accounts, no annual fees or administration fees, maybe you're getting some sort of loyalty points or cash back. These should all be part of your considerations in your decision-making process.

What will you pay for?

Although online banks have great perks, in my opinion, you may feel that the price for certain financial products are worth it for you. Ultimately, you have to decide who has the products that you want and are willing to pay for. For example, for me, I'm not willing to pay for my chequing account. Instead, I have a no-fee chequing account. On the other hand, I am willing to pay for my credit card because for me the travel perks and loyalty points I earn make the annual fee worth it. So do some research for yourself and determine what types of accounts work best for you.

What types of accounts do you need?

After you decided who you will bank with, you need to then decide what types of accounts you will use. Here are some questions to consider: (1) Are you going to be keeping your money in chequing accounts and/or savings accounts? (2) Will you utilize registered accounts like a TFSA versus simply a high-interest savings account? 

There is truly no right answer here! My recommendation is to do what works for you. Simplicity, in my opinion, is what works best. For me, that means having a dedicated bank for my savings accounts, my credit cards, another for my fun spending, and finally one for my chequing account.

 So really the goal here is to figure out what works for you. For you, it may be less of a headache to simply pick a Big 5 bank for a one-stop-and-shop and open all your accounts with them. If that works better for you then great! Just pick what meets your true financial needs.

For more insight on how you build your financial system, check out Ep.12 Your Money Management System.