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Unlocking Financial Freedom: The Advantages of Having Multiple Bank Accounts

In this article, we will learn about the benefits of having multiple bank accounts and how they can help you manage your finances better.
If you are following our series of articles, then congratulations. If not, you can check out the first article here.

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This article is the second of the series, so let’s get started.
Having multiple bank accounts can be highly beneficial for you in many terms. As you remember, in the previous article, I asked you to have 3- bank accounts.
So the following will be the usage for us.

First Account

The Income Account: All your earnings must come to this account. Having a designated income account will help you track your overall income quite effortlessly, and you will develop a better sense of your money movement. If you are a business owner or you have a separate current account for your business, then I believe you already have some idea of your money movement. Therefore, it would not be a hassle for you to maintain more than a 1-income account.
Another great benefit would be during the time of taxation. A neat and well-maintained structure would allow you to provide the best records to the Income Tax Department and file your returns accurately.

Second Account

Spend It Account: You will use this account for the expenses of your monthly requirements. Whatever the need, pay it from this account. In this manner, you will also develop your monthly outgoing money and use this data to adjust your budget. Trim some from where you feel that it is unwanted.
Having a separate account helps those who want to create a budget for themselves but don’t want to have paper and pencil to note every expenditure or use an app for recording the payments. This method is quite demanding. Moreover, it shifts your focus from actually enjoying whatever you are purchasing. By the end of the month, if you still want a list of your expenses, get a credit card made specifically for this purpose and pay it with your second account. With the help of a credit card, you can have a list of all your spending.

Read More: The Benefits of Credit Cards

Third Account

The Invest It Account: The third and the most crucial account is the invest Account. All your investments will go through from this account. Having a separate investment account can make you more inclined toward investing and utilizing the power of compound interest. This account will also help create emergency funds for yourself, which we will learn about in the upcoming article.
Where you must invest is the subject of upcoming articles, do make sure to read them.
You will be able to understand how your money is growing, and when you redeem some of your assets, it will come directly to this account, reducing the chances of you spending it unnecessarily.

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You could create new savings accounts and use them for specific savings, such as for a vacation or buying your new house.
But more than that, these accounts have the following advantages:
1) Security of funds: If your total investment does not exceed Rs. 5 lacs, you may open FDs with multiple banks. Each depositor in a bank is protected by the Deposit Insurance and Credit Guarantee Corporation (DICGC) up to 5 lacs for the principal and interest against the closure or revocation of a bank’s license. Hence, by maintaining FDs with numerous institutions and having different bank accounts, you can ensure the security of your money.
2) Offers and Benefits: Most banks offer services that customers can use, including a variety of lockers, insurance, premium debit cards, and other advantages. Additionally, account members get discounts and bonuses on purchases, EMIs, and utility bills. So, having multiple accounts will let you optimize savings while spending.

3) ATM withdrawals: Having multiple accounts enables one to access a variety of ATMs while avoiding additional fees because banks restrict the number of free withdrawals from ATMs each month. Those who frequently use ATMs will particularly benefit from this. It is advantageous for people who travel often or live in areas where their preferred bank does not have a strong presence. Additionally, having multiple accounts can provide greater flexibility in managing cash flow and ensure that funds are readily available when needed.
4) Card restrictions: Banks frequently limit the maximum amount you can withdraw using a debit card. If the withdrawal limit on one debit card gets exhausted, you can use a different bank’s debit card if you have numerous bank accounts.

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But before you rush towards opening more and more accounts, it is better to understand some cons as well.
1) Interest Rates: Banks have different savings account interest rates. Depositing money into numerous savings accounts may result in a loss of interest compared to having all your money in one high-yield savings account. Many banks offer higher interest rates if the deposit amount is significant.
2) Minimum Balance Requirement: Minimum Balance is necessary to maintain the minimum balance requirements the bank has set to avoid paying fees linked with bank accounts. The minimum balance requirements for each account must be present, which might tie up a sizeable sum of money and make it inactive and illiquid if someone opens many bank accounts. It might cause a disadvantage because it reduces the amount of money available for other uses, such as investments or everyday costs.

3) Multiple Fees and expenses: Most savings accounts have yearly costs and charges, such as those for ATMs, lockers, and maintenance. For all accounts paying these fees and penalties could lower the interest earned. Even though there are accounts that charge fees, these fees are nothing in comparison to the service and the ease it provides you set up your money efficiently. Moreover, many new companies offer these services at zero cost.

The number of savings accounts to keep open should depend on the volume, risk-hedging needs, frequency, and pattern of transactions. Although maintaining multiple savings accounts requires more work, it may be effective for limiting spending and staying on track with financial goals.
4) Managing Accounts: Managing many bank accounts could be challenging. If you use mobile or internet banking for each account, you face the danger of frequently forgetting the login IDs and passwords. People usually make the mistake of writing down their login information to avoid confusion, which increases the risk.

These are the usual benefits and negatives of having multiple bank accounts. You can clearly see that the pros outweigh the cons by a large margin.

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The Procedure

 1) Create the 3- accounts and designate each account for a specific purpose.

2) Set up net banking and debit card pins for accounts.

If you live in India, you can also enable UPI transactions for your bank accounts.

3) When you receive the money, preferably during the first week of the month, transfer 97-98% of the earned money to the two different accounts. If you are a business owner, you would probably receive money all around the month. Whenever you receive funds, it is not viable to shift the money at that very instant. So I will advise you to decide on a specific day of the month you would transfer the money according to the above-said rules. Let the money sit in the bank if the money comes after that decided day. It won’t affect you that much.

4) Your expense account will cover all expenses, including fees, rent, car’s EMI, and all the other necessities.

5) Your Investment account should get at least 30-40% of your income after taxes. If you find it difficult to achieve, rebalance your budget or work towards creating more income sources for yourself. 


By following the advice presented in the article, you will create a healthy mechanism for your money to flow. Remember, never take money out of investment accounts. The money that once goes inside should not be touched until it has accomplished the purpose of giving you returns that you intended to achieve.
Congratulation on taking the second step in laying down the foundation. I know it might seem a bit too much, but all this will be worth it because you are setting up all of this for 20-30 years of life.

Before jumping to the next part, I suggest you complete the above-said points.
Until then, cheers!!

Finance Education Series

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