These days, bank accounts can do a lot. They make it easy for you to track your spending and receive transaction alerts, often in real-time. They allow you to transfer between accounts and even send money to others in just seconds, even from a smartphone. And many of these accounts also help you reach your savings goals with budgeting tools, automation and competitive interest rates. However, odds are that you won’t be able to achieve all of this with just one bank account. Here’s a look at how many bank accounts you should realistically have and why you truly do need more than one.
Consider working with a financial advisor as you fine-tune your personal finance strategies and priorities.
Why You Need a Checking Account
A checking account is intended to be an everyday transaction account. It allows for both deposits and withdrawals and can be used for a variety of day-to-day spending.
You’ll typically use your checking account as a landing pad for your paycheck, before re-allocating funds elsewhere. From your checking account, you can pay bills, make daily purchases, transfer funds and more. These funds are usually considered short- to medium-term in nature, as they are constantly being spent and replenished.
Money in a checking account can be accessed a number of different ways, depending on the financial institution and even the specific account type. Generally, though, checking accounts offer a combination of debit cards and paper checks, as well as online transfer options.
Why You Need Savings Accounts
Savings accounts, on the other hand, are better suited for medium- to long-term funds, rather than daily spending. The money you keep in a savings account can be tagged for a range of future savings goals, from next month’s vacation fund to your child’s college savings and beyond.
These accounts may be linked to other bank accounts you hold, such as checking. That way, you can easily transfer funds over and track your savings progress. Some banks also allow you to use a linked savings account as automatic overdraft protection on your checking account.
Additionally, most savings accounts offer interest on the balance held. This is often much greater than the interest offered on your checking account (if that account accrues interest at all). This can help amplify your savings and ensure that your money is always working for you.
While you are generally allowed to make as many deposits into a savings account as you’d like, you’re limited in the number of withdrawals you can make in a single statement cycle. Per Regulation D of the Federal Reserve, deposit accounts classified as “savings” are limited to no more than six withdrawals per month. If you exceed that limit, you may incur a fee or see your account closed.
How Many Bank Accounts Should You Have?
So, the question is, how many bank accounts do you actually need? And the answer really depends on your financial situation and your goals.
In general, you should aim to have at least the following bank accounts.
You might also consider opening a separate bank account for:
What to Keep in Mind
Whether you decide to have two bank accounts or 12, there are few things to keep in mind.
Some bank accounts have fees. Certain checking and even savings accounts may charge monthly maintenance fees. These fees are often waived if you meet certain deposit or average balance thresholds; if you don’t meet these requirements, though, the costs can really add up quickly.
Make sure you’re maximizing interest rates. Right now, according to the FDIC, the average savings account has an APY of just 0.06%. However, you may be able to earn much, much more than that by shopping around for a high-yield account, like those offered by many online institutions.
Keep good records of your accounts. The more accounts you have, the easier it is to mix them all up or even forget about some small savings you set aside. Make sure you keep good (but secure) records. You may also want to make a note of these accounts in an In Case of Emergency (ICE) folder, in case something were to happen to you and your spouse needed to manage the funds.
The Bottom Line
For most adults, a single bank account isn’t enough to juggle incoming funds, manage daily spending, and save for future financial goals. How many bank accounts you need really depends on how you manage your money and what your personal goals are, both short- and long-term. For some folks, two or three bank accounts might be perfect. Others could need 10 or more to meet all of their needs.
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