Sometimes managing money can seem challenging, especially if it’s all deposited in one place. You may find it helpful to separate some funds out for a vacation while some is dedicated to bills. However, when all your money is in one place, it’s very tempting to use up whatever is in front of you.
That’s why some responsible savers try what’s called the “envelope” method of saving money. Similar to placing cash for different purposes in several envelopes and storing it under a mattress, you could open several bank accounts to accomplish the same goal. Let’s look more closely at how this method could benefit you.
Create an Emergency Fund
One major reason to open multiple bank accounts is to create an emergency fund. If you have all of your money in one place, it’s more difficult to designate some in your mind for emergencies. Usually, everything in your account is up for grabs. However, if you open a special bank account meant specifically for emergencies, your likelihood of touching that money lessens.
Transfer Money to Separate Accounts
One benefit of opening at least one bank savings account and checking account is being able to transfer money back and forth to different accounts when necessary. For instance, suppose you’ve opened a bank account specifically meant for emergency savings, while you have another for vacations.
If you go on a vacation but don’t end up spending as much as you’d originally intended, you could simply transfer that money over to the emergency account rather than run the risk of needlessly spending it all.
Use for Discretionary Purposes
Sometimes you know you may need to set some money aside for use in the future, but you don’t know for exactly what just yet. For instance, you may want to set aside a slush fund for when you need to renew your driver’s license or get an oil change–things that are not a part of your regular bills.
Also, you may want money set aside for times that you want to go out and have fun. Opening a separate bank account for these purposes will make sure that you don’t dip into money you need while ensuring you still get to have a little fun.
Take Advantage of High-Interest Savings
Bank account holders often fail to realize the benefits of bank account interest. Many banks offer high interest savings accounts, which provide account holders with free cash just for storing money in their accounts. Some interest rates have gone as high as 6 percent APY, even though as of late they haven’t been as high due to the recession and bank failures.
This doesn’t mean that there still aren’t high-interest savings accounts to take advantage of. If you search for some rates in your area, you’re bound to find a bank and rate the suits you. This could really help you grow your money so that you’re not always spending every penny in your accounts.
Have Money Ready for Automatic Bills
One problem that some people have when paying their bills is juggling their automatic bills and making payments with checks or debit cards. Sometimes automatic bills don’t go through right away and if you aren’t totally organized, you could accidentally write a check or use your debit card thinking that money to pay a bill has already been pulled out of your account.
A great way to combat this is by opening an additional bank account. By knowing the account is to not be used for anything but automatic bill payments, you ensure that money is always available for that specific purpose.
Now that you know of the many reasons that opening multiple bank accounts can maximize your finances, it’s time to get started. The more time you dedicate to researching the best account options and interest rates, the more likely you’ll be to find the best bank account for you.