How many bank accounts do you need?

It sounds simple: one current account and one savings account probably both in just one bank or at most two. But for many of us, life is a little more complicated, and it can be reflected in the number of bank accounts or banks we have.  In the new year edition we shall be examining about seven to ten different bank accounts that may be necessary for an average family man (this is not to sideline women in the discussion, but to draw the maximum level under which a single man, a married woman or a single woman may find his/her level). But for now and the next edition, we shall be discussing the different sides of multiple bank accounts.

On a general note and as we observed in the first part of this series, it’s not unusual for somebody to have five or more bank accounts, sometimes spread across multiple financial institutions.

Managing all those accounts can be time-consuming and/or confusing, which is why many people want to streamline. But unfortunately, there’s no one right answer for everyone.

Personal finance is just that – personal. What makes sense to one individual or couple may not make sense to another. There is nothing inherently good or bad about having or managing multiple accounts as long as it’s working for that individual.

But helping you determine how many bank accounts you need and how many financial institutions you should work with often involves asking some fundamental questions about your goals, financial competence and needs. We begin that question and answers now:

Chasing  higher interest yield?

If you’ve ever thought about opening an account with a bank with an expectation to get a better interest rate, you’re in good company with this question. And the answer is you need a Fixed Deposit Account) popularly known by bankers as Term Deposit or Tenored Fund.

In addition to higher rates, FDA accounts often have useful savings features that make it easy to set up automatic savings plans that draw from a traditional brick-and-mortar bank account (current and savings).

When it comes to FDA bank accounts, you can chase rates with as many banks as possible, and you could even shift your balances between them in their rate wars. But, when it comes down to the actual difference earned, it’s rarely going to be worth the time and effort if the amount of money you are playing with is not significantly high, say 10 digits.

Should an account be goal-driven?

A savings account doesn’t have to be for a specific purpose, but many savers choose to create a separate account if they’re trying to build a lump sum for a specific purpose, such as a down payment on a home or a rainy-day fund in case of an emergency like an illness or job loss.

While spreading your savings across multiple accounts will slow the amount of money you make on interest, it’s not necessarily a bad idea to have a goal-specific savings account.

It makes sense to have separate savings accounts under two conditions: if it helps you reach your goal and you’re able to regularly monitor the accounts to make sure no unauthorised transactions have occurred. Many savers are just happy to see their savings balances grow, regardless of whether the funds are for a specific purpose or not.

What has marriage got to do with more accounts?

Just because you’ve joined your lives together in matrimony, it doesn’t mean you have to use joint bank accounts. Or at least, you don’t have to use joint bank accounts at the expense of your own individual accounts.

Many married couples choose to maintain a shared joint account and separate individual accounts. This allows couples the flexibility to make independent financial decisions, since not every financial decision is going to involve both parties.

For big financial decisions like buying a home, a new car, or paying a big school fees, it may be necessary to be on the same page. But for little expenses like eating out at work or buying new clothes, it’s often a good idea to give your partner a little space.

Shared decision-making on such minor day-to-day expenses can easily lead to constant disagreements. Money is a tough subject for married couples, and many cite finances as the No. 1 cause of marital stress. Having some autonomy with accounts gives couples more breathing room and independence to make their own financial decisions when they don’t affect the other couple.

From the forgoing you can see why you may need multiple bank accounts just because you got married.

But can your head manage multiple accounts?

If you think keeping track of multiple accounts is a headache, you’re right.

When people have a single account, they have a very clear and precise idea about how much money they have and they are unable to distort the available account information to justify spending, hence they spend less and save more.

But while maintaining one account means you’re likely to be less “fuzzy” on the total, it may not be all that practical for some people.

What if I watch the COTs?

If there’s one common thing we all have about our banks, it’s the fees, sometimes hidden charges and over stated Commission.  In fact, the Central Bank of Nigeria cited bank fees as a top consumer complaint of the banking sector. Bank charges could be the No. 1 reason why you might want to streamline the number of accounts you keep and number of financial institutions you do business with.

Bank charges are wasted budget items and doing anything you can to limit and eliminate them altogether is very important. The more bank accounts you have the more of it you get.

But don’t assume that multiple accounts necessarily mean added fees. So as long as they aren’t incurring fees, there’s no reason not to have more than one account.  A lot of banks waive fees if you use direct deposit or maintain a minimum balance.

Are multiple accounts more secure?

I have not mentioned in this series that for some people the phobia of bank failures had driven them to maintain accounts in multiple banks to avoid putting all their eggs in one basket. Let me quickly dispel that fear as no longer real since the regulatory authorities have taken charge of depositors’ funds in the event of failures. Hence if that is your reason for maintaining accounts in more than one bank stop wasting your time and resources and chose one bank.

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