Seriously, how many savings accounts do you really need?

Competition among banks is giving rise to innovation, much to the benefit of the consumers. For instance, after the Reserve Bank of India (RBI) deregulated interest rates on savings accounts last year, banks have been vying with each other to woo consumers.

Some banks, such as YES Bank, are offering a good 7% on savings accounts, while there are others, such as ICICI Bank that are giving reward points for transactions. Banks give reward points for various transactions, from activating net banking to setting up electronic clearing service and the like. You might even get reward points for maintaining a monthly average balance.

But before you get tempted to open one more savings account, answer one simple question: how many savings accounts do you really need?

[caption id=“attachment_477870” align=“alignleft” width=“390”]  Most banks today charge a fine if you fail to maintain an average quarterly balance amount. You would need to take time off your busy schedule to find out whether you have the minimum balance required.[/caption]

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A dip-stick survey showed us that most people had at least four to five savings accounts. And with every change of job, we tend to leave a trail of savings accounts behind us. These accounts may also have some good amount of money lying idle in them.

So what’s the ideal number of savings accounts one should have? “At the most, an individual should have not more than two accounts: one, where he gets his salary and the other, investment account,” says, Ranjit Dani, charted accountant and certified financial planner based out of Nagpur. So, maintain a salary account and one more account for investment requirements. In fact, the investment account can actually be a joint account with your spouse, while the spouse will also have her individual savings accounts where the salary is credited. Investment account is from where you set your ECS for various investments, your EMIs and the like.

So, even if you switch your job, and hence the bank in which you have your salary account, you need not go through the headache of setting up a new ECS for your EMIs and investments. For the daily requirements, use the cash from your salary account. “This strategy makes your finances simple, clean and clutter free,” Dani says.

You will be relieved of the task of tracking multiple accounts and also maintaining loads of documents such as statements, cheque books, and the like.

Moreover, most of the banks today charge a fine if you fail to maintain an average quarterly balance amount. You would need to take time off your busy schedule to find out whether you have the minimum balance required.

In addition are the risks associated with accounts lying idle. Such accounts become inoperative after a particular period of time (which varies from bank to bank) and eventually inactive, raising the risk of frauds. There have been instances when bank employees siphoned off funds from such idle accounts, and the account holder realised it only very late.

“Recently, I suggested closing multiple accounts to someone. He had a total of 11 savings accounts. The total amount he’s had left lying idle in those 11 accounts was 4.5 lakh,” Dani says.

Quite a bit of amount with no use, right?