Opening a bank account is now easier than ever. Most credit unions or banks offer this service via online banking. How do we keep our finances with a minimalist approach?
Online banking is extremely beneficial for the following reason:
- Paying bills. No need to go to the branch or the actual billing company to make a payment. Online banking makes it easy for you. Pay every single bill from the comfort of your home.
- Transfers. With a few clicks, you can move money from your chequing to your savings account.
- Automation of transactions. Now, to make the previous 2 benefits even more attractive, you can also set up automatic payments to your bills. You can estimate the dollar amount of your monthly bills and pay a little bit more on every invoice; this way you’ll build up a credit on your account and establish a cushion for those months where the bill goes up. Reassess every year.
- Investing. Most third party investing companies can be set up as a bill payment (via payees) and transfer your desired investing amount with a few clicks.
How many bank accounts do I need?
Too many bank accounts can get messy and kill the fun of managing your finances. It should be fun! Explore alternatives and try different options. When you start feeling anxious, overwhelmed or stressed, it is time to take a step back and make things simpler. I recommend 5 minimum account to keep your finances minimalist:
1. Chequing Account
- All the money from your principal job or side hustles should land in your primary chequing account.
- All automatic payments should come out of this account as well. Examples: Bill payments, transfer to your savings or investment accounts.
- If you don’t have overdraft protection, make sure to have a few hundred dollars extra to avoid any payment to bounce and generate fees.
2. Savings Account
- This account should be your short term savings cushion.
- Use it to save for a new computer, vacation, weekend getaway or to take money from if your credit card balance went a little bit over than expected.
3. Credit Card
- Use one with rewards that make your life easier. Examples: Redeem points on groceries, travel or cash-back.
- Even if you have your finances under control, establish a maximum credit card balance for every single month. The balance should include all the categories under your budget where the transaction is expected to go through your credit card. Example: Groceries, personal spending, entertainment, subscriptions, bills, etc. When you start seeing your balance reaching the limit, it is time to stop spending!
- Take a look at my Budgeting 101 and Budgeting Apps posts!
- If you are still struggling with credit card debt, don’t use it for day to day expenses and stick with debit until you pay off every single dollar.
- At least 1 credit card with an active status is necessary as there are some transactions that require a credit card, like booking hotels or flights.
4. TFSA – Tax Free Savings Account
- This is one of the greatest investment gifts from the Canadian government.
- Use this account to invest for your retirement (if you have maxed out your RRSP limit) or for gaining interest on your emergency fund.
- Everyone has a different TFSA limit, make sure you are within the allowed deposit amount every year.
5. RRSP – Registered Retirement Savings Plan
- Saving for your retirement is crucial. Choose a company with very very low management fees and commissions. I recommend Questrade.
- Set up automated deposits from your chequing account on a monthly basis, minimum.
(If applicable) RESP – Registered Education Savings Plan
- If you have children, saving for their education is peace of mind and one of the greatest gifts you could give them!
- Like your retirement savings, automate a deposit to this account every month. Choose an amount that makes sense for your current finances.
5 accounts and online banking is all you need to keep your finances minimalist, tidy and in order. It will make your life so much easier!