• Monday, June 17, 2024
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How many bank accounts do you need?

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Is it really beneficial to have multiple bank accounts? At one point or another, you may have wondered how many bank accounts you should have. With so many current and savings accounts to choose from, it can be quite challenging to decide to have too few, too many or just enough. The answer to this is that the number of accounts you should have depends on your financial goals and your ability to meet account requirements.

Having a required number of bank accountsmight depend on the stage you are in life. For instance a young graduate in his or her twenties needs at least 2 accounts – a current and a savings one. The current account will be where inflows will be domiciled such as salaries, while the savings should be used to keep aside monies for the future such as emergency funds. The savings account should be a high yielding one.

As this young graduate becomes a more accomplished professional needs will change. At this stage he or she might have started deploying an investment strategy. Purchasing stocks or landed property might be the next steps to be taken, which will necessitate opening accounts to keep monies set aside for different purposes. This means now having a minimum of four accounts – one current and three savings accounts.

By the time you throw in marriage and children the individual’s need for more accounts will increase. There might be the need to open a joint account, a second current account where both parties could contribute and deposit money for various purposes. It is customary to also open a high yield savings account for each child to put money aside for their future. At this stage one could have as much as ten different current and savings accounts.

At retirement the number of accounts may be scaled back as the children have gone with theirs, and perhaps most financial goals have been met. Retirees may also have other goals like planning their funerals and also receiving their pension and gratuities which could be paid into existing current accounts. A high yield savings account should still be maintained with emergency funds as always.

Here are five reasons why everyone needs to have multiple bank accounts according to moneycrashers.com
1. You Have Multiple Savings Goals. The main reason to open more than one account is to track exactly how much you have saved toward each individual savings goal. For example, if you want to save three months’ worth of income in an emergency account, set money aside for a down payment on a house, and fund your summer vacation, then you could open three accounts to see at a glance how close you are to reaching your goals.

2. You Need to Separate Your Savings. You need to keep some of your money on lock-down so it’s available if you face an emergency. Consider keeping an emergency fund in an account that’s easily accessible, and then store the remainder of your funds in accounts tied to various short- and long-term targets.

3. You Are Concerned One of Your Banks Could Fail. While NDIC reimburses you if your bank goes under, it could take time before you have access to your money. Keeping some money in another financial institution means that you are more likely to always have funds when you need them.

4. You Can Receive Multiple Perks. While you may want a bank with an ATM near your home or workplace, online banks often offer better interest rates, and some institutions give you a bonus for opening an account. You may be able to take advantage of perks from several institutions if you open multiple accounts.

5. You’re Indecisive. You can try out different banks for a while to gauge their levels of service.

Despite the various advantages, there are several reasons you may want to keep your savings in one place rather than in multiple accounts:

1. Building Banking Relationships Can Be More Difficult. Even if you choose to have multiple bank accounts, it may pay to keep them with one financial institution, as some banks provide lower interest rates on loans or reduce fees for customers with multiple accounts.

2. You Could Lose Interest. While the interest paid on most savings accounts is pretty low, some accounts pay a higher interest rate on a larger balance. Spreading your funds into many accounts may keep you from earning the highest rate.

3. You May Find It Confusing. If you have an amount allotted to save each month or you receive an unexpected bonus or gift, you’ll have to decide whether to put it all toward one goal or to split it between various accounts. If you have only one account, you won’t have to decide immediately how to appropriate the money.

4. Multiple Accounts Can Complicate Automatic Transfers. If you choose to have money transferred from each paycheck, it may be too much to keep track of if you are having cash transferred to a variety of accounts.

5. You May Lose Some Money. If you are less-than-perfect at keeping track of your finances, you may be better off with one account – or at least with keeping all your accounts with one financial institution so you don’t forget what you have and where it is.

6. You Could Pay Higher Fees. Some financial institutions charge fees for their accounts, especially on accounts with a low balance. Make sure you’re not overpaying by dividing your savings.

The truth is that keeping money in several places could be a headache, however keeping several accounts will help you to be better suited to achieve your financial goals. I posit that it is virtually impossible to build wealth streams just having one or two accounts. What happens when you start a business? In addition to your individual accounts you will have to establish business accounts. Youneed to embrace the idea that multiple accounts is the way to go.

PROFILE
Kenneth is currently the Managing Director of GfK RT Nigeria, the West African subsidiary of the fifth largest Market Research Agency in the world. He promotes Moneytalk, a knowledge based organization committed to dispensing financial intelligence that leads to financial freedom.
You can reach him with your feedback on [email protected] or 070 6337 3391 if you would like him to facilitate Money talks and lessons at your events, seminars or conferences over the weekend in the Lagos area. You can also visit www.moneytalkng.com for additional resources on financial intelligence.
You can also follow him on twitter @moneytalkng. Or visit Moneytalk Resources Youtube channel for Money Lessons videos.