TD Bank’s inaugural Financial Preparedness Report revealed that 44% of Americans think about their financial preparedness daily, but 36% of respondents reported being unconfident that they had enough savings to cover unexpected bills that could arise. While planning for the unexpected can be challenging, it’s essential to start by ensuring that your finances are correctly set up with your banking accounts.
What are the most common and costly mistakes that people make when setting up their accounts? GOBankingRates spoke with banking experts to find out the mistakes that you want to avoid to ensure that your banking setup aligns with your financial goals.
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“The mistake that is most likely to happen to people when they establish their bank accounts is putting everything under the same roof,” said Ryan McCallister, a banking expert and founder of F5 Mortgage. “They operate their spending, savings and bills as well as emergency funds out of one checking account, and this makes it difficult to tell where money is actually going.”
You want to ensure that every banking account serves its own purpose so you don’t get confused about what’s happening with your money. By having all of your funds in one account, you can easily spend more money than you intended to or touch your savings without realizing it.
McCallister suggests dividing your accounts by purpose:
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Another common mistake when setting up a bank account is not understanding its purpose. McCallister stated that it’s vital that you understand the significance of every account within your complete financial picture. You don’t want to make the mistake of opening multiple accounts to chase a promotional rate or some bonus. Before you open any kind of banking account, make sure you need and want the account — that it plays a designated role in your finances — so you don’t have your funds spread out over random accounts.
McCallister stressed that people tend to neglect automation. They use memory to send money to savings or to pay bills and this can result in late payment or inaccurate savings. When setting up a banking account, you also want to take out the guesswork about budgeting by automating transfers. This basic setup performed at the early stages can spare you headaches and overdraft charges in the future.
