How Many Checking Accounts Should You Have
How Many Checking Accounts Should You Have

How Many Checking Accounts Should You Have

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How Many Checking Accounts Should You Have

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Why Is There A Hold On My Checking Account?

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

I inherited this attitude from my dad, who did the same thing. The benefit of this is that you can separate your money by different purposes…but this only works if you have a reason to open each of the accounts.

A few years ago, I started consolidating my bank accounts and my financial life feels much simpler now. I help my clients do the same thing. If you’re feeling overwhelmed by the number of bank accounts you have, here’s where to start: Ask yourself why you opened each account. If it’s not a clear goal, you’d better end it.

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

Checking Account Alternatives

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 (now at 1%). I recommend keeping your savings account in a different place than your checking account, so when you log in to see your checking account balance you won’t see your savings account every time. Aim to save three to six months of net pay for emergencies.

If you own your own business or even have a part-time side hustle, make sure you set up separate bank accounts from your personal accounts. It can be easier to track your business expenses and do your year-end taxes by simply using your business checking account for these expenses. Make sure you set aside a percentage for taxes in your business savings account every time you get money into your business.

If you are saving for a specific purpose, such as a vacation or a down payment on a house, I recommend that you open a separate savings account dedicated to this purpose. (David Bach calls it the “Dream Basket.”) I love that Ally Bank allows you to have multiple savings accounts and nicknames for each one. Make automatic contributions to your emergency savings and your Dream Savings account every month.

This is one of the little recommendations I give to my clients, that is a big shift for them. They save for a vacation and they don’t feel guilty if they go ahead, because they haven’t stolen their emergency savings to go on vacation. If you don’t start funding your dreams now, when will you start?

Do You Need A Checking Account To Have A Credit Card?

Moral of the story: Keep it simple. Most people only 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 the 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 answering all your personal finance related questions. Have a question of your own? Email your money[at][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.

NOW WATCH: The easy steps everyone should take to get out of debt, according to a certified financial plannerJustin Pritchard, CFP, a fee-only advisor and personal finance expert. He covers banking, loans, investments, mortgages, and more for The Balance. He has an MBA from the University of Colorado, and has worked for credit unions and large financial firms, in addition to writing about personal finance for more than two decades.

Why Should You Open A Checking Us Bank Account?

Michael Boyle is an experienced financial professional with more than 10 years working with financial planning, derivatives, equities, fixed income, project management, and analytics.

A savings account is a type of account offered by banks that gives you a safe place to keep your money and regularly earns compounding interest.

A savings account is a basic type of bank account that allows you to deposit money. You can withdraw your money from these, and most banks will pay you compounding interest on the balance of these accounts. The purpose of a savings account is to provide a safe place to keep money that you don’t use for regular spending.

Many banks, credit unions, and other financial institutions offer savings accounts in addition to other accounts. You may even find some savings accounts offer higher interest rates than others.

Having Multiple Bank Accounts? How Many Do You Really Need?

When you deposit money into a savings account, it is insured by the Federal Deposit Insurance Corporation (FDIC). If something happens to the institution where your money is, you get it back – up to a limit.

Most savings accounts offer compound interest as an incentive to save money. When you deposit money, it earns interest, which is returned to the account. The new balance will earn interest, etc.

There is no limit to how much you can keep in a savings account, and you can make as many deposits as you want.

The Federal Reserve used to limit the number of savings account withdrawals to six per month as part of a rule called Federal Regulation D. The Fed ended this rule in April 2020. Unless your bank restricts it, you free to make as many withdrawals as. you have to from your savings account until the Fed reinstates the rule.

Best Business Checking Account

Although Federal Regulation D has been put on hold indefinitely, banks can still set their own limits on savings accounts, so check with your bank to find out the limits.

Once the rule is in place, it’s important to note that certain types of transfers will count against it. Personal transfers, transfers by mail, or ATM withdrawals from savings do not count toward the six transfers per month rule or affect savings account status.

To compare savings accounts, you’ll want to look at the annual percentage yield (APY) the account pays, as well as details such as minimum deposit amounts, fees, and other features.

Opening a savings account should take less than an hour (sometimes just a few minutes). The easiest way to open an account is to find a bank you trust and open it through an online application. If you want to do it in person, visit a local bank branch and talk to them about opening an account.

Too Many Bank Accounts Can Harm Your Money

To open an account, at least one account holder must be 18 years or older. Specifics vary from bank to bank, so it’s helpful to ask if you’re opening a savings account for a minor. There are many options available, so check what your bank offers before opening an account for one of your children.

If you find yourself looking at institutions you are not familiar with, make sure they are FDIC or NCUSIF insured (for credit unions).

While savings accounts are usually free, there are limitations and some potential costs. Accounts generally have minimum balances that you must maintain.

Banks usually charge a monthly or annual fee, or both, if you don’t maintain the required minimum balance. These minimum balance payments will be taken from your account. It is possible to lose money with a savings account if your balance drops to zero and your bank withdraws a maintenance fee. Then you may also owe an overdraft fee.

Do You Have Too Many Or Too Few Bank Accounts?

Credit unions don’t charge fees like banks do. However, most restrict a certain dollar amount that you must deposit when you open your account. For example, if the required amount is $25, you will need to deposit that money to start your account, and you will not be able to access it as long as your account is open.

Some banks or credit unions will waive fees for a savings account if you have another account at that institution. You may be charged if you close your checking account while keeping the savings account because the accounts are usually

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