Six-account model: How it works and what it offers

Definition: What is the six-account model

The origin of the six-account model reaches back to the Canadian author T. Harv Eker. His approach: Besides a regular checking account, five additional instant access savings accounts should be set up not only to regulate everyday spending, including for instance buying groceries or toiletries. Using the six-account model, he wants to make medium and long-term financial goals and their implementation achievable. By the way: You can find information about implementing the three-account model and the five-account model here.

The six-account model in practice: How to implement it

As already mentioned, in the six-account model, a total of six accounts are set up in which you’ll distribute your income percentagewise. Important: T. Harv Eker always starts from a net amount. So if you work freelance or are in some other way self-employed, deduct the tax load expected and transfer it to a separate account.

Account 1: The account for your everyday needs

Transfer a good half of your income, at most 55%, to the first – and probably most used – account. Not only your rent or costs for your home are paid from this account; also your clothing, your groceries and your insurance are paid with the money in this account. The advantage: Most of these expenses can be nearly 100% planned for. It helps here to keep track of your purchases and thus set a budget.

Account 2: The account for long-term reserves

The second account is the most important after the first because it will form the foundation for your retirement fund. That means: You can access this money only after you’ve passed time X. In the first step, build up a certain foundation so that you can live from your savings for two or three months if worst comes to worst. And building on that, you’ll save additional funds for when you’re aged. Transfer 10% of your net income to this account each month.

Account 3: The account for future investments

Saving only for your retirement? That’s not the case with the six-month model. It also considers medium-term savings, for example to take a well-deserved vacation. For this purpose, transfer 10% of your net income to the third account each month. You can always access this account whenever you want to make a bigger investment. But be careful: Be perfectly clear in advance what is a regular expense and what can be considered a bigger investment.

Account 4: The account for furthering your education

Education is not only one of the keys to success; it also costs money. That is why investments in your education are part of the six-account models and are reflected in your budget with 10% of your monthly investment. With this reserve, you can pay to further your education, take advantage of sponsored advanced education, or attend workshops and training courses – always keeping the long-term goal in the back of your mind that this education will pay for itself in the future.  

Account 5: The account for your entertainment

Until now the six-account model has sounded rather boring? Don’t worry – there’s room for fun too. Another 10% of your net income forms the basis of account 5 for all expenses that you would otherwise not afford. Because you’ve already taken care of everything else. That way, you can easily pay for spontaneous meals in restaurants or short trips using the financial resources in account 5.

Account 6: The account for donations

The last 5 to 10% of your net income remains for the donations account. This should help you to let go of finances while doing something good. Because you’ve already taken care of all other aspects of life, you can spend this money without concern.