Some people find managing a single bank account already troublesome. Those who live paycheck to paycheck, particularly, do not see the point of having more than one bank account. However, a lot of financial advisers say that setting up multiple bank accounts is actually a smart move.
1. It will allow you to save strategically.
Banks that will allow you to create different savings accounts provide you the opportunity to manage your finances in a highly strategic manner.
For example, you have something huge to spend on in the nearby future. Creating a separate savings account for it will remind you constantly that you have something important worth tightening your belt for.
It’s like a psychological block that directs you into a pensive mode every time you feel like making a sudden purchase such makeup on sale, especially if you have named that account your “Maldives Holiday Fund.” You will not be able to help yourself from comparing the value of the purchase you want to make and your dream vacation.
2. Having both checking and savings accounts can help protect your future.
You want to be able to separate the money that you are setting aside for the future and the money you need to access easily for expenses. By keeping these separate, you can track your cash outflow better and protect the money that you really should not touch for the time being.
It’s also important to mention that checking accounts do not earn interest. It is not a good place for the money you want to grow. However, it can actually impact your credit report in certain ways.
If you manage your checking account properly and boost your credit score, you can reap the benefit of getting the best interest rates on everything from a bank car loan to a personal loan for your wedding.
Meanwhile, the money in your savings account is not as accessible. If you wish to tap into it, it will require a longer process than signing a check and giving it to someone.
3. There are specific savings accounts that can earn you more money.
Certificates of deposit (CDs) or time deposits will provide you a better interest rate by holding on to your money for a specific period of time. You are not supposed to access this money for the applicable time period so it can grow more in value.
But, if you truly need to tap into this money, be prepared for the penalty because such activity is a violation of the CD terms.
Retirement accounts, on the other hand, will safeguard your golden years. You can grow the money you put into it faster especially with all the benefits it typically comes with. This account will also allow you to invest pre-tax income, add the best investment banks today.
It’s good to consider these special savings accounts while also maintaining a regular savings account if you want to have more money set aside for the future.
4. Having multiple bank accounts cultivates a savings habit.
Different bank accounts can serve as visual and tangible reminders of the things that truly matter in the long run – such as your emergency fund (this is the money you set aside for crucial situations that your regular budget cannot afford) and your retirement savings. These can help curtail “bad” spending inclination.
Many have also mentioned that their different bank accounts inspire them to find more ways to earn money and save. When they see that the numbers are not moving much for certain accounts, they are driven to look for side hustles.
They know that every bank account has an important purpose. Therefore, it’s crucial to put a good amount of money into each of them.
Being smart with money can save you a lot of worries about your current life and the future. So, consider the solutions discussed here and continue to learn more strategies you can implement to manage your resources well.