How Many Bank Accounts Should I Have

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How Many Bank Accounts Should I Have

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How Many Bank Accounts Should You Have

I’m one of those people who saves money like a squirrel: several bank accounts with a little money in each.

I inherited this quality from my father, who does the same thing. The advantage of this is that you can allocate your money by different goals… but that only works if you have a reason for opening each of those accounts.

A few years ago, I started consolidating my bank accounts and feel that my financial life is much simpler now. I help my clients do the same thing. If you’re feeling overwhelmed by the amount of bank accounts you have, here’s where to start: Ask yourself why you have each account open. If it doesn’t serve a clear purpose, you’re better off turning it off.

You need a checking account at a bank that is convenient or easily accessible. You don’t have to pay any fees to have this account. If you are, call your bank and find out what you can do to get a free checking account. Otherwise, it might be a good time to switch banks. Don’t jump through a bunch of hoops for a free checking account – keep it simple. I usually recommend keeping a few thousand dollars as a buffer and moving the rest of your money into a high-yield savings account.

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Everyone needs a savings account for emergencies. I like high-yield online banks like Ally, because the interest rate is usually better than what you can get through your local bank or credit union (currently at 1%). I recommend keeping your savings account separate from your checking account, so you don’t see your savings account every time you log in to view your checking account balance. Aim to save three to six months of net salary for emergencies.

If you own your own business or even have a part-time side hustle, make sure you set up bank accounts separate from your personal accounts. This is going to make it easier to track your business expenses and do your taxes by using your business checking account to account for these expenses at the end of the year. Set aside a percentage for taxes in your business savings account every time you make money in your business.

If you are saving for a specific goal, such as a vacation or a down payment on a home, I recommend you open a separate savings account set aside for this goal. (David Bach calls this the “Dream Basket”.) I think Ally Bank allows you to have multiple savings accounts and a nickname for each of them. Set up automatic contributions to your emergency savings and your dream savings account each month.

This has been one of the little recommendations I give my clients, that makes a big difference for them. They save for vacations and don’t feel guilty when they go on them, because they’re no longer raiding their emergency savings to go on vacation. If you don’t start funding your dreams now, when will you?

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Moral of the story: keep it simple. Most people just need a checking, savings, and dream account. If you have old accounts that you rarely use, it’s time to close them. There is no need to keep an account open at your hometown credit union if it no longer serves a purpose. Time to streamline and simplify!

This post is part of an ongoing series that answers all your questions related to personal finance. Have a question of your own? Email your money to [dot]com.

Sophia Bera, CFP® is the founder of Gen Y Planning and has been quoted in The New York Times, Forbes, Business Insider, AOL, The Wall Street Journal, and Money Magazine. Tweets, travels, and loves helping millennials manage their money more effectively. curious? Sign up for the free Gen Y Planning newsletter.

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If you’ve ever asked yourself, “How many bank accounts should I have?” Or having trouble managing your money in general, you’re not alone.

For starters, by strategically opening multiple bank accounts, you can take advantage of timely promotional offers and ensure you’re always getting the best rate on your deposits.

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The answer to the number of bank accounts you should have depends on your personal situation. Most people are fine with a few bank accounts at first.

As your needs change, you may find it easier to budget your money with additional accounts. Let’s talk about what those accounts are and how to use them.

Most everyone knows that they need at least one checking account to keep cash for daily use. Singles and married couples who manage their finances jointly need only one checking account.

However, some married couples find that having two checking accounts to split their finances works best for them. If one couple is a spender and the other a saver, this can be a good solution. Of course, then both spouses need to manage their checking accounts independently.

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One or both partners will also have to manage a third joint checking account to pay common bills such as utilities, rent/mortgage, etc. This account setup adds a new complication to the situation, but for some people, the benefits outweigh the drawbacks.

Savings accounts generally offer many useful benefits that are designed to be customized for work. For example, savings accounts offer high interest rates and have limits on how often you can withdraw money. Keeping your savings separate from your spending money (like your checking account) ensures you don’t accidentally spend your money on impulse purchases.

Most people also have at least one savings account. However, if you live paycheck to paycheck, frequently go into debt, or just want to plan things better, you may find that multiple savings accounts for different purposes work best for you. This is known as a “bucket” savings strategy. Many banks and credit unions will let you open multiple bank accounts online to get this.

Many people find it helpful to have a separate savings account, especially for an emergency fund. This money is for unexpected car repairs, job loss, or emergency hospital visits. It’s like a fire extinguisher in a glass case: you only break the glass (ie take out the money) in a true emergency.

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If your emergency fund is mixed with your savings for other accounts, you run the risk of unknowingly withdrawing cash. As a result, you may find yourself in a sticky situation when a true emergency arises.

Many people find it helpful to set up separate savings accounts for short-term savings goals such as vacations, holiday shopping, or health care expenses. Some people refer to these mini-savings accounts as “sinking funds.”

Again, setting aside these savings ensures that you don’t use them for wrong purposes. It’s a shame to save up for this trip only to accidentally spend the money on something else and not have the money to buy your tickets.

It’s also a good idea to have investment accounts for your future, such as retirement or a down payment on a home. Unlike an emergency fund, these are planned expenses that will pass. However, they are still years in the future.

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Many people invest their savings in equities such as stocks, bonds, index funds, and mutual funds. These investment accounts typically allow your money to grow in value over time. On the other hand, they are not insured, and there is a possibility that you will lose a big deal.

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