When you’re working toward different financial goals, it may be a good idea to have different bank accounts that serve different purposes.
The exact number of accounts will depend on your financial situation and goals, but most people need at least one checking account and one savings account. As you begin to grow your income and savings, and therefore your goals, additional accounts may better organize your finances.
How many bank accounts should I have?
The answer will be a bit different for everyone.
“There is no one-size-fits-all approach when it comes to personal finance, as money is a personal matter, and decisions about it are personal as well,” said certified financial planner (CFP) Ohan Kayikchya.
One easy rule-of-thumb that Kayikchya recommended is to maintain four separate accounts — two checking and two savings accounts.
When you should have multiple accounts
If you’re just starting to manage your money, one checking account and one savings account may be enough. But additional accounts can be useful to track your finances once life gets more complicated.
You only want to open a new bank account if you have a definite purpose for that account. There’s a lot of responsibility that comes with opening a bank account, such as maintaining a balance and keeping it from falling in the red, so make sure each account you open fits in with your lifestyle and financial goals.
When you should have a secondary checking account
A secondary checking account can help you differentiate between different types of spending. For instance, Kayikchyan suggested having one checking account that you use for recurring bills.
Bills set up to this account can include things like your rent or mortgage, car payments and utilities. After that account is established, you can set up another checking account for variable spending, like clothing, entertainment, and pretty much any expense other than bills.
When you should have a secondary savings account
Opening a secondary savings account is a good idea if you have a specific financial goal you’re saving for. Kayikchyan recommends having two savings accounts—one for an emergency fund and at least one other for other savings goals, such as a new car.
“Some banks offer savings accounts that have sub-accounts or buckets within them,” said Kayikchyan. “You can categorize the buckets per your saving goals, such as vacation, taxes, gifts, a down payment for a house, or something else.”
When to add a money market account
A money market account is an interest-bearing savings account typically offered by banks and credit unions. These accounts usually come with a higher annual percentage yield (APY) than a regular savings account, though this isn’t always the case.
Some people choose to open a money market account when they have a significant amount of money they want to save for a large purchase, such as a down payment on a home.
Joel Ohman, a CFP and chief executive of Clearsurance.com, recommended opening a money market account once you’ve built up an emergency fund with several months’ worth of living expenses.
“It will earn more interest than it would in a savings account but still remain liquid so you can access it in an emergency,” he said.
Learn more: the pros and cons of a money market account
Tips for managing multiple bank accounts
As your bank accounts multiply, keeping tabs on them becomes a chore unto itself. Thankfully there are easy-to-use online products at the ready.
“The best way to manage bank accounts, regardless of the quantity, is with the help of online banking,” Kayikchyan said. “Sometimes it is hard to keep a close eye on every transaction, especially with multiple accounts, but the internet and technology made this task simpler than ever before.”
Personal finance apps, like Mint or Personal Capital, are another option for tracking multiple bank accounts. These apps let you track various accounts from many institutions, like banks and credit unions, in one central location, so you have a comprehensive picture of your finances.
Pros and cons of multiple bank accounts
Pros
- Organize spending. When you have different accounts for different spending categories, it’s easier to figure out how much went where.
- Optimize rewards. If one checking account provides a great cash-back option on its debit card and another gives a competitive yield, you can get both.
- Maintain membership. It may pay off to keep an account at a credit union to maintain your membership so that you could qualify for other banking products, like loans and CDs, on which credit unions tend to offer more favorable rates.
Cons
- More logins. More accounts means that you’ll have to keep track of more login information, usernames and passwords (or you could get an add-on or app that’ll do it for you).
- More moving pieces. With more accounts comes more responsibility. Just remembering which accounts you have with which financial institutions may require note taking or more brain power.
- Potential fees. If you’re not careful in picking out and managing your multiple accounts, you may have to pay monthly maintenance fees or overdraft fees.
Final verdict
Many people choose to open multiple bank accounts so they can use different accounts for different purposes. For instance, you may want a basic checking account you use for daily cash flow and to pay your bills. You may also want to open a high-interest savings account where you can keep your emergency fund.
Different banks offer different perks, so opening multiple accounts allows you to take advantage of different promotions. For example, some banks will give a one-time cash bonus for opening an account if certain criteria are met.
But Ohman warned that you can have too many bank accounts, making it difficult to keep track of them all. And since many banks have minimum balance requirements, opening multiple accounts puts you at an increased risk of incurring fees.
Therefore, try to strike a balance.
Open a savings account for your emergency fund, and then add one for each new aspirational goal, whether it be a vacation fund or camp for your kiddos.
A checking account dedicated to your big purchases, such as your mortgage, in addition to your everyday spending could help you organize your spending.
Should these multiple accounts feel overwhelming, you can pare down until you’re comfortable.
Frequently asked questions (FAQs)
What’s considered as having too many bank accounts will vary from person to person. But if you’re having a hard time keeping track of all of your accounts or maintaining the minimum balance requirements, you may have too many bank accounts.
And keep in mind, the FDIC will only insure up to $250,000 per owner, per FDIC-insured bank, per account type. If your money is spread across multiple checking, savings, and money market accounts at one bank, your total coverage is $250,000 across all of them.
No, your credit score is affected by your lending history while your ChexSystems report keeps track of your banking history. In general, your bank accounts will not show up on your credit report or affect your score in any way.
The only exception is if you had a negative balance on one of your accounts that you never repaid. In that case, the bank may report it to credit reporting agencies.
“Small business owners should always separate their personal finances from their business accounts,” Ohman says. “So, if you’re starting or running a small business, you should have multiple accounts.”
For example, you may want one account that handles payroll and another where you save money for taxes. It’s a good idea to work with a CPA and ask for their recommendation on how many accounts you should open.
Kayikchyan says the number of accounts a married couple opens will vary depending on their budgeting style. It’s a good idea to have at least one joint checking account you use to pay your shared bills. And if you’re working toward a mutual savings goal, a joint savings account gives both partners access to the funds.
