Using 5 different bank accounts can get crazy

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Having multiple accounts feels super empowering to begin with, and then we all know how it goes - downhill. It’s likely that you had a student account you barely had money in through college, and then another for your job, another for investing, maybe another for travel, savings, emergency funds, the list keeps going on. While some superhumans (or psychopaths) are able to keep a track of all their accounts and maintain them through the years, us mortals don’t quite get the hang of it. It’s beyond possible that you have a low balance on one of your cards, and use another one just out of convenience and impatience when you shop. 

Next thing you know, you have a chain of accounts you have to add or reduce money from. Plus, it’s easy to sit at the end of this chain reaction and wonder where all your money went. Don’t know if multiple accounts are actually worth it? Read on 

1. Maintaining ‘em all 

Having multiple accounts is all fun and games till you actually have to keep a track of your expenses from all of them. It’s difficult enough to maintain one excel sheet a month for your expenses, imagine having five sheets for your accounts. Let’s take a moment to also talk about credit cards and keeping a track of multiple credit card bills and paying them before you’re penalized. If you’re super keen on having multiple accounts but a mess at managing, there are multiple apps out there to help you keep track. Try to use Ask Fi to see where you’ve been spending and how much you owe yourself. The process is quite simple, you just have to link all your accounts and see consolidated reports of your expenses.  

2. More accounts = More money locked in

When you spread your money across multiple savings and investments accounts, you decrease the accessibility of that money. I know this is better for most of us, if taking that money out will be difficult, we most likely won’t use it. But this could also be a  risk if you don’t calculate it keeping the scope of emergencies and running out of cash in mind. A possible solution to the ones who are risk-averse is looking into Neobanks like Fi where you can categorize your savings. You can build savings accounts according to your goals and regulate them with ease. You can also have smart deposits, and access your money whenever. 

3. More the accounts, less the interest

Imagine having five different accounts and tracking them all year only to know at the end of the year that if you limited your accounts you’d probably get more interest?’ When your savings are allocated across different accounts, you’re going to get multiple interests/returns. But well, you probably would get a larger sum if you had a higher balance in lesser accounts. Do yourself a favour and calculate how much your aggregated returns will amount to both ways. If it looks like you’re going to face a loss, consider building smart deposits and looking into high yield savings accounts instead. 

4. More the accounts, more the tax headache

 Of all the pros and cons out there of having multiple accounts, this one is probably the most frustrating. Not only do you need to have a checklist of your expenses but also calculate taxes on each account of yours at the end of the year. You need to figure out what tax slab each account is under, what your deductions are, and what your returns if any, will look like. If you have multiple accounts and are scared about the taxes, you have two ways to look into this - eliminate your excess accounts and narrow them down, and/or use platforms that do your taxes for you. 

5. Multiple minimum balances everywhere 

Be it accounts with a minimum balance or even fees for maintenance,, with multiple accounts you’re simply going to be paying more. Apart from reducing your accounts, try committing to permanent accounts, if your mix has at least one or two permanent accounts, you know that those are the ones you don’t mind spending on. The rest are negotiable, and quite often situation based. Assess if it’s necessary for you to have these and don’t forget to close your accounts when you reach your goals with them. Alternatively, try opting for online banking to reduce your maintenance fees and higher return rates.

On an ending note.. 

Having multiple accounts isn’t everyone’s cup of tea. Before you commit to accounts based on your short term goal, commit to your long term goals. You don’t need to have it all figured out, you just need to lay a foundation for your future self. Stick to permanent accounts for your long term goal. Then, have a look at your short term goals, if you’re confident of handling the maintenance and extra work that multiple accounts bring, you can stick to them. The options of exploring categorized savings, smart deposits and FIT rules are endless, look into them as a suitable alternative for those short term goals.

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