How to choose a bank and how many?

The purpose of having multiple accounts is to organize your money.

One thing we Indians can’t control is overspending. There are so many advantages on having multiple accounts. Having separate accounts for different purposes makes it so much easier to track your finances, plan your goals and realign if necessary.

Ideally, one must have 2-3 active accounts.

Day-to-Day account (Could possibly be your salary account)

This account is for your day-to-day activities. For all expenses throughout the month or until the next salary is credited. Purpose of this account is quick access to funds. You may even set up auto payments for your monthly bills, SIPs, EMIs or fixed expenses such as rent.

Checklist for selecting the right bank:

• This bank should be good with technology. A good dependable online portal and a brilliant app is the most important thing you should look for.

• The bank should have good coverage for ATMs. Best is to have one close to your home. Lower ATM fees is a must.

• The bank should have good options of debit and credit card.

• Lowest transaction fees.

• Lower minimum balance. We know we will be all out by the end of the month :P

• Another feature you can ask for is Auto sweep*.

• Good customer support team.

Pro tip: A standard Private bank (Say HDFC, ICICI, Kotak, Axis etc.) would do the trick.

Emergency fund account

This account is used to set aside a large sum of ammount for any unforeseen situations like unexpected medical situation, loss of job, home appliance replacement, major car fix etc. This fund creates a buffer for any emergency situation and can keep you afloat when you need money the most without relying on instant loans or borrowing from friends and family. It becomes even more prudent to have an emergency fund if a considerable amount of your income is going out on paying EMIs. It doesn’t matter what the situation is, your EMI must be paid on time to safeguard your credit score.

Checklist for Emergency fund bank:

• This bank should be very safe. You may need a big chunk of your fund at one go. In recent times, RBI had imposed withdrawal limits in banks like PNB, Yes Bank and some co-operative banks. This would not help you when you need the money immediately in emergencies.

• You should be having a debit card and a cheque book for this account.

• Higher the savings interest rate, the better it is. A large sum of money would be lying down doing nothing for a long period of time. Let the fund earn some interest at the least.

Pro tip: Any PSU bank (Say SBI, BOB, Union Bank etc.) would do the trick.

*We will discuss where to park your emergency fund and how to get best returns out of the fund at later stages.

These are the two accounts an individual "must" have. The following ones may be required as per your requirement.

Mid-term savings account:

This would be required if you are not someone who can control your spending. Or if you do not want to have a headache of making calculations in mind. This account serves the purpose of large sum outflow every year. Say your car or health insurance. Or maybe car maintenance cost. Or may be a year-end travel plan that your friends are talking about. Why not have a guilt free New Year!

Good side of this expense is it is a predetermined amount. You know what you need to save and by when you would need to save it. Once you have the numbers ready, can you plan on how you would like to save it. Would you want to save every month for it? Or would you prefer to use your annual bonus. It is up to you.

You can go with any bank that has internet banking facility if the purpose is to save for Insurance. If the purpose it to save for travel, choose the bank with wider coverage and can offer a good travel credit card. How about free lounge access feature with your credit card and international usage.

Family Account:

This would be a joint account where your spouse or children (if you want to) can have access to the fund. You can put your child’s pocket money into this account and let them use it as they wish to. This way you know where they are spending and at the same time, they are learning a habit of managing their finances. This same fund could be used to do all your family shopping, and this lets you keep track of your house spending.

Again, the bank for this purpose could be any bank of your choice and usage.