3 reasons why 2 savings accounts work best

After a long time I am finally at peace with one situation – the number of savings accounts I operate. Why is that such a big deal, you ask? Well, I have realized that 2 is the perfect number in this case.

While in the US, things are in black and white thanks to the concept of a checking account (zero interest transaction-friendly bank account) and a savings account (varied compound interest accounts made for savings), in India all we have are savings accounts.

Being my 3rd workplace, I had at one time opened a salary account at every workplace. The first one being an HDFC bank account, the 2nd being ICICI staff account and now currently I have a salary account thanks to an Axis Bank staff account. However, splitting money across these 3 accounts not only proved cumbersome and difficult to track but also expensive. My HDFC account was no longer a zero balance account and I was no longer willing to block Rs. 25,000 which was the minimum balance required by them.

On the other hand, I was stuck with ICICI considering my demat account at ICICI Direct was linked to them as well as being my home loan EMI account. Over the last few months I have realized that in India 2 really is the ideal number of savings account to operate, reasons for which I will enumerate below:

  1. Simple bifurcation: You can treat your 2 accounts like a “Spend” and a “Save” account. It is easy to put to use the “pay yourself first” or the “earn more, spend less” basic of personal finance. Just put an auto debit on your salary account to transfer an amount that you are comfortable with to the 2nd savings account. Ensure you have all you need for EMIs, rent, other fixed obligations as well as your monthly spends. Use your savings account to plan where to invest it in according to your goals – be it Term deposits, Mutual Funds, Direct stocks, money market funds or even just emergency savings.

    Excessive splitting of money across multiple bank accounts is just tiresome and complicated

  2. No excessive splitting of mone Our lives are anyway complicated with something or the other needing our attention all the time, right? Then how do you keep track of money in multiple accounts and how do you decide what do you do with it? Sure, sometimes you might feel lazy to initiate the process to close a long-standing savings account that you have stopped using but the result of that effort will really be a more simplified banking process for you.

    Maintaining any bank account comes with a slew of costs or a minimum balance

  3. Cost effective: While you might easily get a zero balance account for a salary account, any other bank account will have a minimum amount that you would need to maintain. Do you really want to block Rs. 10,000 or even Rs. 25,000 at multiple accounts at the risk of having to pay a penalty, if not done? I for one know that I hate paying the fees for it and neither do I like the feeling of my money being blocked simply for maintaining an account.

These 2 bank accounts for me are in addition to the joint account that I share with my husband for household expenses.

How do you split your earnings and savings? Agree or disagree? Let me know through your comments or email me at aparna@elementummoney.com