Whether you’re living paycheck to paycheck or starting to build a nice nest egg, you’ve probably asked yourself, “How many bank accounts should I have?” It’s a fair question.
Today, you have more options than ever, but is there such a thing as too many bank accounts? Do you even need more than one?
While the answer isn’t written in stone, here are some basic guidelines to help you figure out just what the optimal number of bank accounts for you.
How Many Bank Accounts Should I Have? The Bare Minimum
OK, let’s start with the basics. The absolute bare minimum for accounts that you should have is two. You need a checking account and a savings account. Each of these accounts will serve a separate purpose.
This serves as your primary money account. You put money in your checking account to handle your bills and other spending. You may (or may not) actually use checks, but you’ll probably use a debit card. If you want to have your bills automatically paid, this is the account to do it.
Even if you’re living paycheck to paycheck, you’ll want a savings account. This is where you stash money for emergencies. It’s essential to have an emergency savings account to avoid financial disaster when life happens.
Cars break down, medical emergencies happen and sometimes even jobs are lost. This account is your safety net. Try to add whatever you can into it and leave it alone until you really need it.
The Case for Multiple Savings Accounts
While it’s important to have your checking and emergency savings accounts, you may decide that you want to have one or more other savings accounts, too. Why? You may have several separate savings goals and want to keep the money separate so you can measure just where you stand on each.
For instance, you may have one account to save for a car purchase and another for that down payment on a house. Even short-term savings like money you’ve budgeted for Christmas or your vacation fund can have their own accounts. This is called the bucket method. Each savings goal has its own account or “bucket.”
On the flip side, you want to be careful about the accounts you open up. If you have too many accounts with small balances, you could get hit with maintenance fees. You may want to start with just a few. You can always open new accounts if you realize it will be beneficial.
Consider Having Multiple Bank Accounts With Different Banks
If you do decide to use multiple savings accounts, you should consider using more than one bank. While having them all in one place may be convenient, it also comes with some risks.
Deposits up to $250,000 are insured by the FDIC at any bank or by the National Credit Union Association at any credit union. So overall, your money is safe.
But if your account gets hacked, you may have trouble getting your money back immediately. Having money in another bank works as a sort of safety net. Also, you get to test drive multiple banks and maybe you’ll find a new favorite.
As you shop around for savings accounts, look for features that will make the account a better fit for your specific saving goal. Here are some common savings account features to consider.
- Interest rate: The average savings account is just 0.09% APY, but some savings accounts pay 2% or more. If you’re opening an account for a long-term savings goal like a down payment for a house, it’s worth it to find an account with a favorable interest rate that helps your money grow.
- Minimum balance: Some accounts have a minimum deposit to open the account or have a minimum balance requirement. If you need to start out small and don’t think you will have $500 or $1,000 in the account at all times, you may want to consider a different account.
- Direct deposit: Will you be able to have money go directly to this account? Setting up direct deposit from your paycheck or from your checking account is the easiest way to ensure that you put money into your savings on a regular basis.
- Online transfers: Will you be able to move money from the savings account to another account easily? You may want that kind of flexibility, but if you’re prone to dipping into your savings too frequently, you may not.
- Fees: Keep an eye on the small print for monthly maintenance fees. These fees should either be minimal or nonexistent.
- ATMs: Do you want access to cash from your savings when you are out and about? Pay attention to whether the account allows you to use ATMs for free and how ATMs many they have.
Find the Right Number of Accounts for You
If you were hoping to get a concrete number for how many bank accounts you should have, we’re sorry. It’s just not that simple.
The answer depends on your needs and even your personality. If you find that you’re having trouble keeping track of your accounts, it may be time to combine a couple and simplify. Do what works best for you.
As you try to figure out your best plan of attack is, be sure to build a budget. You need to be able to pay your bills first. Then, if you can set it up to have money automatically withdrawn from your checking to your various savings accounts (preferably right after each payday), you’ll be saving money without even thinking about it.
Start with your two basic accounts and let the number grow naturally from there as your income and your savings goals grow. Set goals, choose accounts wisely, and enjoy watching your savings stack up.
Tyler Omoth is a freelance writer covering topics from personal finance to career advice and even lawn care. His work has been featured on TopResume.com, Writersweekly.com and more. He is also the author of over 70 educational books for children and a proud parent of twin toddlers.