We Spaniards like to know that we have our savings on hand, available for the month’s expenses, to deal with unforeseen events or simply to treat ourselves. Not long ago Triodos Bank made a study to find out where we keep our money and discovered that almost half of those surveyed (46%) keep their savings in checking accounts, far from the 28.9% who opt for savings accounts and 15.4% for term deposits. There are those who even concentrate everything in a single account in which payroll, direct debits and expenses are accumulated (without much order).
Is that a good idea?
Within easy reach. The Triodos Bank study or other similar ones, such as Financial Competencies Survey from the Bank of Spain, are interesting because they give us an idea of how we manage our savings. For example, they show that we are mostly inclined to keep money in checking accounts or even in cash, on hand for unforeseen events. Also that we are not given to risks.
According to Triodos46% keep their money in a checking account that allows them to access it immediately, 28.9% use traditional savings accounts and 15.4% opt for fixed-term deposits. According to their calculations, the remaining 9.7% keep the money in cash, a more common option among young people between 18 and 25 years old. In general, almost all families in the country (more than 90%) have a bank account to make payments, ‘piggy banks’ in which the average balance a couple of years ago was around 8,000 euros.
“It doesn’t make sense.” Elizabeth Wakefield, financial advisor, recently warned in the ‘It Makes Sense’ podcast about another scenario that goes one step further and can complicate the management of our money: having all our funds no longer only in checking accounts, but concentrated in a single bank deposit. That is, 100% of our savings remain in the same account which, in addition to generating low profitability, makes it difficult to control expenses.
“Having all the money in a checking account is one of the main mistakes that many people make. Why? Because it is as if you had socks in your house with forks and tools like hammers. I mean, it doesn’t make sense. Why then do drawers and closets exist? To put things in their places,” reflect the expert in statements collected by The Salmon Blog. The key, he insists, is to have a simple banking structure that helps us manage our money.
What to do then? Experts usually opt for maintaining several accounts (the number does not always coincide) that help us compartmentalize, control and even have a clearer idea of how much money comes in, how much goes out and what we spend it on. On the Wakefield podcast suggests have three accounts: a main one, to which the income arrives and in which the usual bills are direct deposited, such as rent, telephone, electricity… And a secondary account (“ideally paid”, apostille) that serves as a cushion to fall back on in the event of “unforeseen events or emergencies”, apart from ordinary expenses. For example, a car breakdown.
The expert even recommends a third account for expenses that are not common, but not extraordinary either. To be more precise, the idea is to dedicate it to ‘periodizations’, expenses that we know will arrive in the medium or long term and for which (precisely for that reason) we can prepare. The clearest example that quotes Wakefield herself It’s the holidays. Are you traveling to Ibiza in September and want to spend 2,000 euros? Well until then, month by month, you put 100, 200 into that ‘piggy bank’… whatever you decide.
Is it a universal standard? Not at all. In your corporate blogBBVA explains that “there is no ideal number of bank accounts” and remembers that it largely depends on each person’s lifestyle and financial objectives. In any case, it shares the benefits of having at least two: a deposit for regular expenses (both planned and those that arise) and another exclusive one for savings.
What’s more, Luz Martín Manjón, BBVA advisor, recommends saving enough money in that second account to cover at least six months of expenses. The OCU advocate also for thinking about the money deposited in the checking account and that the amount does not exceed three months of salary.
Audit expenses. Among other issues, compartmentalizing and controlling the money we have in each account helps us have a precise ‘photo’ of what we dedicate the funds to. If we stop having payroll, invoices… everything mixed in the same deposit, and we organize our income and exits, it will be easier for us to review them. “We haven’t just done an audit of our expenses,” insists Wakefield. With this clarity it will be easier for us, for example, to locate subscriptions for services that may no longer interest us.
Are they all advantages? No. Accounts usually have minimum balance requirements if we want to receive interest, something that will be more difficult to achieve if we have the money divided into several deposits. The same goes for possible overdrafts. As remember from Washington Trust, also requires greater attention (and effort) when deciding how to distribute funds or movements.
The positive part: Opening several accounts at the same time avoids the risk of running out of money in the event that one of them is blocked or we cannot use it, something that could happen, for example, if the card is blocked or lost. Another advantage that they usually point out experts is that, if you have six-digit savings, you must remember that in the euro zone the Deposit Guarantee Fund only covers up to 100,000 euros per owner. “If your savings exceed that amount in accounts and deposits, try to distribute them in several entities,” slide the OCU.
Money calls money. Of course, savings don’t have to sit ‘still’ in a checking account either. Banks offer other financial products that help you get more out of them, such as investment funds and depositswith different characteristics and types of profitability. Depending on the product, the customer must be aware that its use may involve risksalthough there are experts who also warn of the cost of having money ‘gathering dust’ for years in the bank.
Why’s that? Because although it may seem to us that our money is safely deposited in the bank, immune to danger and with an unalterable value, in reality inflation can erode its usefulness and cut both what we can do with it and the effort that saving it has represented.
“Uncertainty is the perfect excuse to do nothing. And doing nothing is the surest way to slowly become poorer while money loses value in the bank. The real risk is not the news we see on television, but paralysis,” claimed recently in the diary Today Jabier Arnelsa, director of Renta4Banco in Badajoz. “Money in the bank loses value every day.”
Doing the math. Bankinter carried out a study in 2024 that helps to better understand how inflation undermines the value of ‘unemployed’ money, immobilized in a checking account or in cash, stuffed under the mattress. “100,000 euros saved end up having an equivalent purchasing power of 85,873 euros (14%) less after five years with inflation at 3%,” warns. If this scenario of rising prices extends for a decade, the same amount of money would have “an equivalent of 73,742 euros”, 26% less.
Images | Jorge Fernández Salas (Unsplash) and Alexander Mils (Unsplash)
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