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How many savings bank accounts and how much money should you keep in them?

With every new job comes a new salary account. That’s because, often the new employer asks the employee to open a separate salary account and in the process, you might have ended up with several bank accounts over the years.

If you are in the mid-stage of your career path, it’s likely you might have switched a couple of jobs. With every new job comes a new salary account. That’s because, often the new employer asks the employee to open a separate salary account and in the process, you might have ended up with several bank accounts over the years.

 While initially, these saving accounts are zero-balance accounts – which means you don’t have to keep any minimum balance like the regular ones – it usually gets converted to a regular bank account once you switch your job. 

The problem of plenty

This creates a new set of challenges. For one, you will now have to maintain minimum balances in each of the non-salary bank accounts to avoid penalty. Most banks today have a minimum (average quarterly) balance requirement ranging between Rs 5,000-15,000. Blocking such an amount entails an opportunity cost since you hardly earn anything (about 3-4% p.a.) from it. And not maintaining the balance attracts hefty penalties of up to Rs 750 every quarter.

Secondly, there are different charges levied on these accounts – debit card annual fee, non-activation fee, SMS charges, and so on. So, if you are keeping the account idle, it’s likely that its balance will start dwindling without your notice. 

One, two, three ..

So, what’s the ideal number of bank accounts you should hold? For starters, you need to have a main account which is permanent. This will be linked to all your mutual fund investments, tax filings, home EMI payments and other automated bill payments. Tax refunds, for instance, will be easier, if you link it to your main account.  UPI-linked payments can also be made from this account. 

Whatever the case financial experts believe, anything more than three is a pain in the neck.

In addition, you can hold another bank account that will be your salary account. It will be a temporary account and you will close it as soon as you leave a job (and open a new one). Ideally, you should automate transfers of your salary from this account to your main account and thereafter plan your expenses and investments. 

Sometimes, people also maintain a joint account with their spouse or parents to smoothly manage their household expenses. 

Whatever the case financial experts believe, anything more than three is a pain in the neck. If you have more bank accounts that you find it difficult to manage, close them at the earliest. Each bank follows a process for closure. Ensure you de-link it from all NACH mandates (auto payments), surrender cheque book and debit card, maintain minimum balances and pay closure fees (if any) to permanently close it. 

How much money in it?

Before we arrive at a number, let’s first of all, understand that your emergency fund is not to be in your savings account. It should rather be in a safe liquid fund – that will be encashable within 24 hours. 

And arriving at the apt bank balance is seldom an exact science. It should be big enough to make you sleep peacefully at night.

Bank balances of individuals usually start dwindling as you start allocating money towards monthly investments and expenses. And hits a low just before the salary arrives. What if an unexpected expense comes up in these times? 

That’s where budget calendaring helps. It will let you know in advance which expenses or investments are coming or about the expected shortfall. You need to keep a reasonable balance in your savings account which could be anywhere from one to two months of your household expenses. All depends on your comfort levels. 

Takeaway

Too many bank accounts are cumbersome and entail a financial cost. One can easily manage with one or two of them. The money you have in it depends on your comfort level. It should be large enough to have a good night sleep, while not tempting you to splurge.

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