It may seem unnecessary to spread your money throughout different accounts, but there are surprising benefits of multiple bank accounts.
Banks frequently compete for our attention, but we don’t have to put all our eggs into one basket. Often, we don’t worry about what could go wrong until, well, it does. A your revenue streams start multiplying, though, you may want to have more than one outlet or resource for these finances. But what are the advantages of holding funds in more than one bank and are there any cons?
Benefits of multiple bank accounts
Having multiple bank accounts does not necessarily mean you have to go through more than one bank, but it can be helpful. These homes for you finances can and should include not only checking and savings but also an investment account. Here is why you might consider having more than one bank holding your cash:
- Protect your money. This is, perhaps, the main reason why you having more than one account would be beneficial. In case something should happen with your primary account, whether that be a system or company failure or theft, you have a back up to cover yourself in the meantime. So, if your debit card becomes compromised, the devastation won’t be nearly as disastrous as it would with only one account. You can really reduce your risk of any hardship by spreading out your money.
- Improved financial management. If your accounts have specific purposes, dedicate a certain amount of your income to each avenue. This helps to organize your money and essentially do the work for you. Instead of manually moving money around, it will already go to its assigned purpose. For instance, setting up an automatic deposit to a 401k or Roth IRA keeps it out of sight and out of mind, preventing you from forgetting to place the funds yourself. Storing this money in separate accounts keeps you from spending it. This is also true of your emergency savings accounts.
- The potential perks. Some institutions, such as several credit unions for example, reimburse you for ATM fees. This is particularly helpful when you are traveling and not near your regular institution’s ATM services. Not just that, but signing on with more than one bank provides you with the opportunity to have different ATM options in different locations. Additionally, certain establishments offer better rates, especially online banks, or special promotions just for opening an account with them.
- Insurance for high balance accounts. The Federal Deposit Insurance Corporation (FDIC) protects consumer deposits up to $250,000. If you have more money than this coming in, you will reap the benefits of multiple bank accounts.
Why multiple bank accounts may not be for you
Of course, this option is not best or meant for everyone. Your financial situation may not warrant multiple accounts at different institutions. Your savings may be better suited in one spot. These reasons include:
- No plans to research. If you do not research the options you are considering using, you may find yourself paying more in fees. You could also risk missing interest earning opportunities. Typically, lower amounts earn lower interest rates. Thus, spreading your money to multiple accounts if you have a lower amount may be counterproductive.
- Unable to meet minimum requirements. Many banks require a minimum amount for opening an account. This must also must be maintained in order for interest to even accumulate. If you do not have a large revenue stream, particularly going to your savings, various accounts with different banks may not be for you.
- Needing simplicity. Right now, your finances may need to be simplified, and there is nothing wrong with that. Focus on growth, then move forward.
- No financial goals. One thing we always stress at Saving Advice is to create financial goals. This is so that with every decision you make will be calculated, strategic and encourage progress when it comes to your money. Before looking into more than one account, create a plan and goals so that you can have a positive financial future.
If you’re unorganized or feel as though you won’t be able to track your money in different locations, then you should not distribute your money. However, the benefits of multiple bank accounts should not be ignored. As with anything, just make sure to make wise choices by having a plan, reviewing your options and not spreading your finances too thin that you can’t keep up.
Do you have multiple accounts? How do you organize your finances?