I came across someone asking this question on Reddit recently: “Is it a good idea to have 2 banks accounts from different banks. Like one for my saving and the other for my expenditures?” It sounded like a very simple question to answer but as I replied, I started asking myself the question: “Why 2 bank accounts though?” So this post will be a short one to explain the concept behind it and how it actually helps you save better.
Think of Bank Accounts as Jars
Let’s do a little imagining exercise shall we? Think of your bank account as a jar and the money you put in as… I dunno, oreos. What if we put all the oreos into one jar and would like to save some to enjoy later on. How would you know which oreos are can be eaten anytime and which can’t? Fact is, we don’t.
Problem 1: Accounting
So we have to remember how many we put in every time and hope we don’t forget. And how often do we remember how much we’re supposed to leave behind? Chances are pretty low because there are more important things going on with our lives. This is the first problem: constant monitoring.
Problem dos: Discipline
Every month, we’re given a huge stack of oreos for our hard work (or while hardly working). Even if we know how much we should save for later, if everything’s mixed up together, how likely is it to “accidentally” eat one or two? If you can mentally segregate, great. But most people would be unable to fight the temptation, especially if we see a large stack of oreos.
Problem 三: Emergency
In the event of an emergency, there is a high chance you’ll just binge on whatever is in the jar because it’s justified right? Yes, but this may also leave you with nothing left for normal use! Planning for emergencies is an important method against the risk of running dry.
So 2 bank accounts = 2 jars?
OK, so I think you should be pretty fed up with the oreo analogy. The point being, having your spending and savings account all in one does one thing effectively: make life hard. If 1 account is troublesome, why is 2 any better?
Opening up a second account is not only pretty straightforward; you pretty much don’t have to think too much other than “just save x every month and forget about it”. This solves the first problem of keeping track because well, you only need to put money in.
For those of us who find it a bit harder to control problem 2 of discipline because it’s still accessible through debit cards, you can omit the card and save through bank transfer. Make sure both accounts are with the same bank because banks in Brunei charge an extortionate amount to transfer to their competitors.
Once you solve problem 1 & 2, the last one of emergency fund solves itself because your savings will grow over time. And once you hit (or are near) the recommended amount of around 3 to 6 months worth of your expenses, it’s time to look into investing the rest!
So is having 2 bank accounts necessary? No, you can make do without. But does it help? Immensely! Not only do you segregate to-use and to-save pots (or jars); there’s the added benefit of building a habit and mindset that can translate into investing and starting a business. So go out, learn more and save up!