You should have multiple financial accounts for a bunch of reasons. We cover just five of those reasons today.
Don’t depend on your success one single financial institution or plan of action. For multiple reasons, you’d probably want to have more than one of the same type of financial account spread across multiple financial institutions for a bunch of reasons.
Here are ten (10) reasons why :
1. Service Outage/Downtime In Times of Need
Banks often perform system upgrades, and sometimes, not always there are total service outages. Having your financial accounts in on financial institution may leave you unable to access your account, and sometimes even have issues when payments do not reflect as posted.
So, as long as you have enough funds spread out in several accounts and financial institutions to cover you in the case of an emergency, you would easily be able to handle stressful situations in times of service outages and downtime.
You don’t want to miss a payment or have all your funds stashed up on a single bank, you never know when you might be in a money crisis and your bank is unable to come through.
Take Advantage of the Best Products In Each Category
If you want access to the best in class financial products in every banking category, you are probably going to have to have multiple accounts to take advantage of them. Not all banks are created equal, each bank has its own strengths and weaknesses, thus rarely will a single have the best transactional accounts, savings account, credit card, loan rates and mortgage products. Instead, you will find that one bank has amazing credit card products and another, has the best car loans.
3. Reaching Your Deposit Insurance Limits
This is a big one, for me at least. Some years ago, I witnessed a friend of mine lost all the money in her bank account when the bank went under. This incident really opened up my eyes to the reasons why it is important to spread your money across multiple accounts in banks and credit unions. If you have reached your deposit insurance limit, you should consider spreading out your money to make sure that it is all insured should your bank or credit union go under.
So what exactly does all this mean? Basically, if your bank or credit union has insurance on deposits, you can get access to your money up to the insured limit, should the bank fail tomorrow. Should you have more funds over and above the sum insured, then spread your money all over so that all your deposits are covered. This way, you can continue living your day to day life while the bank’s matter get sorted.
4. You run a business
In order to keep your finances separate – personal and business, you’ll need another account to ensure the smooth running of things. You can do this with the same financial institution as your primary account, however, having your business account in a separate bank can keep you from drawing from the wrong account for the wrong reasons.
Here is why:
(a). Mixing your business and personal transactions can lead to legal troubles as it opens you up for personal liability when you would others be protected.
(b). Separating your finances makes life much easier if you run all transactions in the designated account.
5. For Easy Money Management
A common misconception is that having fewer accounts makes it easier to manage money. However, multiple accounts can help keep you accountable to your budget and allow you to save for specific goals. A single account can make it quite difficult to allocate money to your financial goals and also manage expenses since everything stashed in one account.
In the spirit of keeping things in order and separate, you can transfer money into separate accounts designated for a specific purpose or goal such as a home down payment, new car fund, vacation fund, education fund and more. This way, you are less likely to use up money out of the wrong account. Separate accounts will keep you disciplined and focused on the goals you really care about.
6. Prevent the Bank From Making Drawings
When you make defaults on certain payments i.e. loans, credit cards etc, banks and credit card companies can perform due process and get your account seized to pay off defaults. Particularly, banks can simply make drawings from your account without even going through the legal channels.
Therefore, keeping things separate is for your security and best interest. This way, you can avoid the bank or credit card company from gaining access to all of your money.
Summary
If you currently have all of your accounts at the same bank, you should seriously consider opening at least one other account to secure your money. First, decide what you want and then open the account to cater for that as soon as you can.
Image credits: Top by Serpstat from Pexels
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