One big account vs lots of little ones?

[aussiegal]

Hi,

I am sure that there would be a topic about this on the forums somewhere, but I cant seem to find!

In this era of terrible interest rates what are people thinking re the benefits of having all cash in one place compared to lots of accounts for specialised things? For instance, havng an account for rent and bills, one for groceries etc.

Given that even on the best online accounts the interest is under 4% in Aus at the moment is there any benefit to having savings and spendings in one place?

Thoughts?

[deborah]

My bank allows you to create as many accounts as you like - and you can set it up to automatically switch money between them. Charges for things like ATM withdrawals are based on the total amount in all the accounts, so it really doesn't matter at all how many you have. You can even name them, so they come up on all the screens with your name.

[pancakes]

I suppose the benefit for me of having them in one place is not having to keep track of a bunch of different accounts.

That said, I do have a few bank accounts because I chase the best rate and move my money to which is better at the time. Though with rates over here (Australia) getting lower all the time it almost isn't worth the hassle. I have far too much money in the bank at the moment too and need to start looking at investment options instead.

As far as transaction accounts go, I only have one that I actively use at a time. At the moment it is ING for the 2% cash back and the use of every ATM for free. Unfortunately I suspect they are going to drop their 4% savings rate very soon :(

[ginklord]

My bank allows you to create as many accounts as you like - and you can set it up to automatically switch money between them. Charges for things like ATM withdrawals are based on the total amount in all the accounts, so it really doesn't matter at all how many you have. You can even name them, so they come up on all the screens with your name.

I'd love to be able to rename my accounts... but alas...

You may want to give YNAB a try. They have a free trial. It allows you to budget and track expenses, and you create categories for everything even in one account, and they each have a "balance" based on what you allocate and how you spend.

My wife and I have been using it for about a year now and couldn't go back.

[GuitarStv]

My wife and I have multiple accounts at different banks.  It's more confusing and is kinda a hassle.  I'm in the process of consolidating everything down to one bank right now.

[terran]

You may want to give YNAB a try. They have a free trial. It allows you to budget and track expenses, and you create categories for everything even in one account, and they each have a "balance" based on what you allocate and how you spend.

My wife and I have been using it for about a year now and couldn't go back.

I'll second this. I just closed 9 accounts I had at Ally because I'm now using YNAB. I would have had more, but it was kind of a hassle, and at Ally they're separate accounts, not sub accounts. YNAB lets be do what I wanted to do, but easier.

[Jack]

My wife and I have multiple accounts at different banks.  It's more confusing and is kinda a hassle.  I'm in the process of consolidating everything down to one bank right now.

Ditto. I've realized that having one checking account and one brokerage account is good enough. (I'm even going to close my savings account, because the brokerage's money-market cash sweep option pays at least as much interest as a high-interest online savings account).

[FarmerPete]

I had about a dozen accounts.  I would auto transfer money into different accounts to make sure money was there for irregular bills.  I switched to YNAB back in August, and I couldn't go back to my old system.  I have one account, but YNAB tracks the balance I have saved for everything.  I get the same planning and cash flow management my old system had, but without 20 automated transfers a month.

[FiguringItOut]

I have two accounts and use YNAB to keep track of all of my savings in general and savings for a particular expense (summer camp for kids, car maintanence, etc).  In the bank though, it all sits in the same bucket.  But YNAB is great for keeping these things separated and accounted for.

[Lis]

I use PNC Virtual Wallet and can break my accounts down to sub accounts. It's a great tool for organizing money. I throw everything into my savings account once I get paid, keep track of my AMEX and other expenses through there, then transfer it back to checking when it's time to pay the bills.

I do have separate accounts for my emergency fund (GE Capital) and my down payment (Barclays). These are higher dollar amounts than what I keep in my regular account and get a tad bit more interest (1.05% and 1.00% respectively) compared to the 0.35% at PNC.

[marty998]

I hope all of you with multiple bank accounts are not paying multiple sets of account fees for having them all open.

[dividendman]

Note that if you have substantial assets there are some clear advantages to multiple brokerage and regular checking/savings accounts, namely the government insurance (both FDIC and SPIC) have limits per account in the event of a bank failure or fraud. It's worth considering.

[Nudelkopf]

I've got multiple accounts with Commonwealth. One's a transaction account, two are mid-level interest (2.5%?), and two are 'high' interest (like, 3.5%?). I like being able to rename them and keep track of smaller savings goals.

[pancakes]

I got rid of my commonwealth bank accounts because ING is seriously better in every single way (except for the whole no physical branches thing).

They have no fees, the best interest rate going right now on their online savings account (4% on balances under $100k), 2% cash back on paypass under $100, free use of any ATM, 50c account credit for withdrawing $200 or more at an eftpos terminal rather than an ATM and you can rename your accounts.

I'm pretty sure you can have multiple accounts too but I've never bothered to try/ I only have the one high interest account and one everyday transaction account. If you are in Australia and don't need a branch, I'm yet find a better deal.

[Jack]

Note that if you have substantial assets there are some clear advantages to multiple brokerage and regular checking/savings accounts, namely the government insurance (both FDIC and SPIC) have limits per account in the event of a bank failure or fraud. It's worth considering.

I have a hard time imagining that anybody on this site would have so much money earning ~0% in a savings account that they'd need to be concerned about FDIC limits. Having a large amount in a brokerage account is more plausible, though.

[James]

This is a personal question, no "right" or "wrong" answers. I think MMM keeps things as simple as possible, and he doesn't budget. If he should buy something he does, if he shouldn't he doesn't. How much money is in the bank isn't a factor because there is always money in the bank or available as needed. There are bigger picture principles making the decision than a "budget". So I don't think of budgeting as a "mustachian" way of spending, it's a crutch (very important and helpful crutch) on the path to becoming mustachian.

So that is the way I am heading, I have been closing accounts from our early days of budgeting by having multiple accounts. But having the multiple accounts was a huge benefit right in the beginning. We needed a strict framework to force us into new habits and new thinking, so we had monthly budgets going to various accounts which we moved money between. It forced savings in some areas, but more importantly it forced us to consciously think about our spending. The automatic transfers were not hard to set up, and are not hard to change, so if you want to try it there is no big down side. I use Capital One 360 but there are many good banks, just be sure they have a good web interface for working with.

Right now we are dropping accounts, and we are down to just a few. Things like clothing are so rare, and I never think about the "budget" anymore when buying clothing, we are no longer tempted to spend on clothing that isn't needed or have the right priorities behind it. We don't have an "emergency" account, we have a HELOC that would be fine, and have other savings that could be used if needed. For example, there is a remodel fund that we are saving up to spend this summer, and there is a vehicle fund that pays for maintenance and future vehicle purchases. My wife and I each have small discretionary accounts that we each use in our own way, but that is just us, not every marriage works the same way obviously.

So if multiple accounts work well and helps great, but I don't consider it mustachian to have multiple accounts, keeping it really simple and having it earning money for you is mustachian.

[MacGyverIt]

What about separate accounts for your investments/rentals? I just set up a CapitolOne360 to use with my property manager since I'm about to start renting a place out for the first time and (I'm not there locally to manage it myself) ... and also to keep income lines delineated come tax time.