Have you ever wondered how many savings or bank accounts you should have. This seems to be the most innocuous little botheration for anyone but it could become one of the most basic and important factors to streamline your finances in your financial planning.
As you move across your career through different companies, you might end up with multiple salary accounts with different banks. However, only one of them will end up being your salary account (where your salary is credited every month).
The previous ones will become an ordinary savings account.
Managing so many accounts is a cumbersome task. Let us check how many bank accounts you really need.
How many savings accounts ?
Good personal finance advises that one could suffice all his banking needs with just two bank accounts. Of these two, one is your current salary account and the other is a permanent account from where all your loans and investments are transacted.
Your salary account is permanent till the time you are with your current employer. If you move on and your new employer can use this same salary account, nothing like it, however, if you are required to open an account with a new bank, then your previous salary account can be termed temporary as you are now no longer going to use it actively.
Once you stop using your previous account actively, it begins to become a liability. This is how an individual accumulates many accounts over a period of time.
Let’s talk about the permanent account now. There could be loans that a person has for which EMIs (Equated Monthly Installments) are debited each month or there could be monthly regular investments in mutual funds (Systematic Investment Plans) that are in force – all these need to be linked to your active and permanent account.
So when you move onto a new job, your permanent account will always be active –
so your loans and investments will still in force. Use this permanent account for all refunds and debits that you might have to do. Obviously, you need to replenish this account from your salary account each month.
I learnt this the hard way when an Income Tax refund cheque came to me a year later from the tax department (yeah, they still are that fast in this part of the world !) and I realized that the account number mentioned on the cheque was that of a temporary salary account that was now long closed.
Another important point to keep in mind is that your permanent account should possibly be equipped with net banking and mobile banking along with the plethora of features of core banking so that it provides maximum flexibility to you.
Its important that you do not change the permanent bank account from time to time – that will call for bouncing cheques and default on EMIs.
Why not many accounts ?
The disadvantage with many accounts is that at some point in time after you stop using it as your salary account they lose their privileged status and a minimum balance is required either monthly or quarterly to keep them active.
For example, ICICI Bank’s Regular Savings Account charges, for non maintenance of minimum quarterly average balance is Rs 750/- per quarter. The minimum quarterly average balance for Metro and Urban is Rs.10,000 and for Semi-urban and Rural is Rs.5,000. So as and when your privileged salary account gets converted into a normal account and you forget to keep the minimum balance, you are charged this amount.
So make sure that you close down your account that are lying there serving no purpose. Less accounts mean less statements to read per month and less paperwork.
To have only two accounts, one for salary and another permanent account for your bills and investments.
Category: Personal Finance