Why I have 2 or more checking accounts

Sometimes, when I release one of my net worth reports, I get asked a lot why I have multiple checking accounts.

Right now, I’ve got 3 checking accounts: one for investments, one for fixed expenses and another one in Germany, as I needed an account there for some money I need to get, still. Just so you don’t get confused or misled, I pay taxes on my investment account. I am currently thinking about opening a 4th checking account.

You may have heard of other people opening multiple checking accounts and may wonder how that could help you. Not only that could help you in terms of a better control over your overall spending, as it can also help you relieve stress from managing your finances.

In this post, I will comment on the benefits of having 2 or more checking accounts.

Benefit number one: separate things

If you can use multiple checking accounts, assign each account a specific purpose. In my case, I will open a 4th checking account merely for paying bills (utilities, gas, eating out, groceries, rent, fun, etc). I will transfer €500 to this account at the beginning of the month, and force myself to live off of that.

This is a great way to check where your money is going. I am kinda lost when I don’t do this. The other option is to cash out, but this may not be convenient if you need a lot of money for your month.

Benefit number two: it takes much less time to manage your money

Knowing precisely where your money is going to can be a painkiller. Back in the day, I use to have all my expenses in one card, and I would spend a lot of time checking the expenses and what they pertained to. With a second checking account, you pretty much get the slip at the end of the month, look at it and you’re all set. Ultimately, this is a hell of a stress avoider… With two checking accounts, you’ll track your money flow like you never did before.

What I truly recommend you doing is applying Amdahl’s law to your finances: if you spend 80% of your money on X (say groceries), optimize that and forget the rest!  Within your groceries expenses, if you spend 50% of your money on meat alone, optimize that! You get the idea…

Benefit number three: a motivation to save and invest

Everybody knows this: if you have no limits when spending your money, chances are you’ll invest less. Forcing yourself to spend less money, by separating day-to-day money from investment money into 2 or more checking accounts will motivate you to invest more, as you spend less. At least it worked out well for me.

What many people with two checking accounts do is to separate fixed bills from variable ones. This is a very good system, but I personally like to factor in my fixed costs into the €500 I transfer over to my account at the beginning of the month.

Benefit number four: an actual profit on your investment money

If you decide to open a checking account with interest (for instance, check this one out), you’ll actually make a profit while you don’t invest your money. I tend to park my money until I need to renovate a rental property or I have enough money for a downpayment. This can sum up to $10,000, if not more. Parking all this money without interest means losing money. Quick tip: set up a checking account with interest for the money you save every month.

Benefit number five: create history with a new bank

I leverage a lot. For me, having a credit and non-credit history with many banks is crucial. Why? I don’t know which bank will give me the best offer on my next mortgage. Or which bank will have the best offers and fees. I want to diversify as much as I can, so creating 2 checking accounts will help you with that. If possible, use secure loans on different banks, so you develop a nice credit score with all of them.

 

What to pay attention to if you have multiple checking accounts

If you decide to go with multiple checking accounts, you’ll probably have to spend time opening and monitoring them. I have personally programmed a small Java software which collects information from my bank accounts and tells me everything I need to know. It even sends me an e-mail every day with the amount in each account, variations in regards to the previous months, and where the money went to. I know, it’s awesome, right?

However, keep in mind that some banks may charge you maintenance and even inactivity fees, so stay tuned into your account. You don’t have to code a program like I did, but you should monitor your accounts and don’t forget them.

Also, you can choose among different types of checking accounts. Make sure you’ve got a strategy before you open a second or third account and choose the type of your accounts (with interest, banking packages, etc) wisely. If you have a small business, consider opening an account just for that, and never ever mix your business’ expenses with your personal ones.

Do you have more than 2 checking accounts? What is your opinion on multiple checking accounts?

Let me know in the comments down below.