When to Open Multiple Bank Accounts

Your financial personality and saving habit will
determine your financial position. Opening multiple accounts for various
savings target is an effective way to avoid debt and create wealth.
There are different types of accounts to consider. We
have savings account, fixed deposit, join account and current account. Financial
experts recommend opening multiple accounts for target savings.
Multiple accounts are ideal for highly organized
individuals. Before opening any account compare interest rates and fees on all
the accounts.
multiple bank accounts

Write
a budget

The first step is to list your income and fixed expenses.
The income is the amount for each paycheck while fixed expenses are mortgage,
utility, and rent.
There is also the fluctuation expenses like grocery
bills, medication. Write a practical budget to track your earnings and expenses
for two months. The entire exercise is to create room for savings.
Fixed
expenses
•         House
•         Rent
Fluctuating
expenses
•         Medication
•         Grocery
bills
Automate
the transfer
A very effective way to increase savings is to automate
transfers. Instruct the bank to automate transfer of funds into your savings
account. The amount could be a fraction of your earning depending on your
comfort level.
Open
a fixed account or money market account
If you constantly spend funds from your target savings
account you need an account that would restrict access. A money market account
limits the number of times you can withdraw from the account.
 Another account is
the termed fixed deposit. Early withdrawal of funds from a fixed deposit would
attract penalties. A fixed deposit could be for six months, one year or five
years.
Why
multiple accounts work
Multiple accounts offer individual savings goals like
paying off the mortgage, buying a car. Online banks have made opening multiple
accounts easy. You are at liberty to use one financial institution or multiple
institutions.
Different accounts offer multiple savings options, goal,
better tracking. You can open an emergency account, long or short termed fixed
deposits. Another advantage includes better interest rates, multiple perks or
account opening bonuses.
Advantages
•         Individual
savings goals
•         Easy to
open
•         Use one or
more banks
•         Multiple
savings options
•         Better
tracking
•         Better
interest rates
•         Multiple
perks
Disadvantages
of multiple accounts
The major disadvantage is the lean spread. The individual
will not benefit on high interests on cumulative funds. Others difficulties is
tracking each account and confusion.
There is also the difficulty in reaching minimum balance,
low interest rates on loans. The person can lose money on transfers,
complicated automatic transfers, and higher fees.
•         Lean spread
•         High
interests on cumulative funds
•         Difficulty
in tracking funds
•         Confusion
•         Difficulty
in reaching minimum balance
•         Low
interest rates on loans
•         Lose money
on transfers
•         Complicated
automatic transfers
•         Higher
fees
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