Tighter Than “Mac and Cheese” with Money

December 2nd, 2008, by

Q: My husband and I have three bank accounts. He has two accounts at his job’s credit union and refuses to balance our books and is tighter than mac and cheese. Is this smart to have the money spread out everywhere?

A: Tighter than “mac and cheese!” LOL. I’ve never heard that before. Now, I’m tight too. I hold on to a penny so tight the Lincoln screams.

As for your question, I don’t have a problem with the two of you having a number of bank accounts. In fact, I actually recommend it. I like having various pots of money, each designated for various expenses or savings.

My husband and I have a joint checking and savings from which we pay our regular monthly expenses. We have a credit union account (with both our names on the accounts) where we keep what I’ve coined the “Life Happens Fund.” This fund is different from our emergency fund (kept at yet another financial institution). The latter you use to help when you are in serious financial trouble, such as when you lose a job.

The “Life Happens Fund” is used to pay for large purchases or major repairs. I came up with the idea for this fund so that I wouldn’t tap into my emergency fund.

There’s also another reason to spread your money between various financial institutions. You don’t run the risk of exceeding the FDIC protection. Although many people will never reach the limit or even come close, it’s still a good idea to have some money in different institutions.

In October, President Bush signed the Emergency Economic Stabilization Act of 2008. That law raised the amount of money in bank accounts that the Federal Deposit Insurance Corp. covers from $100,000 to $250,000 per depositor.

However, the increase in the FDIC coverage is only temporary. The basic FDIC deposit insurance limit will return to $100,000 after Dec. 31, 2009. The legislation did not increase coverage for retirement accounts, which continues to be $250,000. The new law also temporarily increased the insurance limit to $250,000 on accounts in federal credit unions and the majority of state-chartered credit unions.

I should also note that federal credit unions are regulated by the federal National Credit Union Administration. This agency operates and manages the National Credit Union Share Insurance Fund, which insures the deposits in all federal credit unions and the overwhelming majority of state-chartered credit unions.

Finally, my one concern would be the failure of your husband to balance the books, meaning he’s not keeping track of the money coming into and out of those accounts (which by the way should have your name on it). Often, people complain they don’t have enough money to last from paycheck to paycheck. What I’ve found is many people don’t have a cash inflow problem; they have a cash management problem. If your husband isn’t really good at keeping the books, then I suggest you take over as the family treasurer.

If you both are bad at money management, figure out which one of you is better, given your limitations. But no matter who does the books, you both need to be involved in budgeting, no matter how many bank or credit union accounts you have.

Last modified: April 26, 2011 at 10:59 am