How Many Bank Accounts Should I Have? Let Me Help You

how many bank accounts you should have

The present-day banks provide a number of account options that you can have. Every account has its own utility, interest earnings and comes with its own set of rules & benefits.  

The account ranges from a simple checking account necessary for daily spendings to foreign currency account helpful for international travel and carrying import/export transactions. 

The various account options can be confusing for a common man. The bad thing is that if you pick a wrong account then the whole of your financial budget and planning can go for a toss, just because you may not get the operational flexibility.

For example, you cannot use a savings account for everyday spendings for its limited withdrawal criteria.

Below you can find the various accounts available, and their benefits. This will help you to know How many bank accounts you should have.  

Different Type of Bank Accounts You Should Have 

#1. Saving Account 

Savings account is recommended when you have surplus cash every month that you can save easily.

Surplus Cash = Salary – Expenses i.e. the excess cash that is left out with your after accounting for all the expenses.

If you are not in a position to have a surplus amount month on month or at least in most of the months then you hardly need a savings account.

A dedicated savings account helps you develop a habit of savings. They offer a higher interest rate but the withdrawals are restricted through regular checks or ATM withdrawals

You need to keep a minimum required balance or be ready to pay charges. The terms of the savings accounts differ from bank to bank.

Check outBarclays savings account review

#2. Checking Account 

Checking accounts can be used in monthly budgeting and carrying on monthly expenses and purchases. If you are married then you can have your own savings account and a joint checking account to manage your home expenses like mortgage, rent and utility bills.

Checking accounts allows the setting of direct debits for your recurring payments like school fees and mobile bills.

Checking accounts require low (less than $5) or zero account minimums. 

Usually, there are no charges on cash withdrawals, bank transfers and POS transactions. But the APY is also zero or at the best up to 0.65% which entirely depends on your bank. 

Certain banks run cashback programs and other bonuses on their checking account which can be helpful to earn back a few dollars on every transaction that you do. You can also open free checking account as well.

#3. Emergency Fund Account 

Emergency fund account is helpful to meet unexpected expenses like

  • medical exigencies
  • hospitalization expenses
  • major car or home fixes
  • cover expenses during job loss 
  • temporary unemployment

Emergency fund accounts keep you prepared to face life’s uncertainties and saves you from two things. 

First, running for money in case of emergency and second from using your credit card or borrowing money at a high cost to meet the expenses.  

You can save up to half a year of expenses as an emergency fund in a high-yield savings account, money market account, or in the certificate of deposit. But make sure that you use it for emergency purposes and not mix it with regular expenses or savings.  

#4. Investment Account 

An investment account helps you build a wealth corpus aligned to your financial goals. The goals can be short term like buying a luxury car, going for an exotic vacation, house down payment, or retirement.

Investment accounts help you generate wealth by facilitating investment in equities, mutual funds, ETFs, stocks, index funds, bonds and derivatives (F&O).

Investment accounts can be opened with brokerage houses, few of the brokerage houses are Vanguard, Robinhood, Fidelity or Charles Schwab.

Investment accounts help you grow money but the downside is that investments do carry certain risks. For example, your money invested in stock is subject to market fluctuations where you can lose a part of your capital.  

#5. Certificate of Deposit 

A certificate of deposit (CDs) is best when you want to set aside a fixed sum of money for a certain time period. For example, you have surplus cash that you want to save for your children’s college fee payment which is two years from now.

In such a case you can keep your money in a certificate of deposit and be worry-free for the coming expenses. CDs help you plan for future expenses.

Certificates of Deposit are offered by banks and credit unions. Certificate of deposits is an interest-bearing time deposit account that has a set amount of face value. The interest rates on CD are higher than any other account type at a bank or credit union.

The face value starts from $500 and goes up to $100,000. The time period range from a few months (usually 3 months) to several years. 

The drawback is that you cannot withdraw or access the money in your CD account. If you want money badly then you need to pay a penalty for liquidating CD investment.

#6. Money Market Account 

A money market account is a hybrid of savings and checking account giving you the benefit of both account types.

A money market account is useful when you have a large dollar amount to save but do not want to fix it for a certain time period. 

You need to maintain a higher deposit in your money market account as compared to the savings account but have the flexibility to withdraw them whenever you want as long as you are under the monthly withdrawal limits.

The money market account offers you a higher interest rate when compared to the savings account but lower than the CD account.

#7. Business Account 

A business account helps you keep your personal and business transactions separate. It is in the name of your business whereas your individual checking account or a savings account is in your personal name.

The business account is like a checking account where you can maintain and account your business money, daily financial dealings, income and expenses. 

All business income and expenses should be carried out exclusively from the business account. Then only you will be able to gauge your business revenues, expenses, profits and tax that you need to pay.

#8. International or Foreign Currency Account

International or foreign currency accounts are useful only if you travel frequently abroad or when you conduct international business that needs foreign currency conversions.

In such a scenario your traditional savings or checking account is more or less helpless in providing you frequent forex services.

Even if they fulfill your foreign currency exchange requirements they will charge a high fee which could range from 0.20 percent to as high as 5% of the transaction value.

Having an international or foreign currency account is helpful where you are charged zero or a very low percent fee on foreign transactions. 

Benefits of Having Multiple Bank Accounts

#1. Different Account for Every Financial Need

Having multiple bank accounts helps you maintain and account for different financial needs without getting mixed or lost. Having multiple accounts helps you track your money individually.

You can have a checking account for home expenses, savings account for surplus cash, an emergency account for unforeseen events and so on.

#2. Use FDIC Coverage

The FDIC covers a maximum of $250,000 for each individual, per depositing institution. So if you have $1,000,000 in a single account then you are covered only up to $250,000 only.

But if you keep $250,000 in four different accounts in different banks or institutions then all of your $1,000,000 gets covered.   

#3. Multiple Source to Access Funds

If you hold all your money in a single account and suppose by ill-luck you lost your check & debit for that account then you will not be able to access your account. 

Having multiple accounts creates multiple fund access points that can help you in such a situation.

#4. Caters to Specialized Needs

Emergency account, business accounts, investment account covers your specialized needs which vary from person to person. 

They help you achieve specific financial goals that are not possible with regular savings or checking accounts. 

#5. Take Benefit of Bonuses and Perks

Different banks and credit unions offer a wide range of account benefits in the form of paybacks, signup bonuses, loyalty programs, free financial tools and perks which you might not know unless you have an account with them.

How to Manage Multiple Bank Accounts

Having multiple bank accounts comes with its own set of challenges like keeping all the checks and cards safe, remembering multiple login IDs, passwords and PINs. 

This can be overwhelming and tedious. You can get easily mixed up or lose track of your account. 

But luckily there are solutions to manage multiple bank accounts. 

#1. Use Spreadsheet (Free)

You can maintain a spreadsheet to keep information related to all your bank accounts like account number, maintained at which bank, log in details and account use type. 

But remember not to store in the passwords or PINs in spreadsheets.

#2. Use Personal Finance Apps (Free or Charged)

There are personal finance apps that like all your bank account information. One such app is “Personal Capital”. The app gives your overall financial position at a single location. 

How Many Bank Accounts Should I Have

You can start by having a savings and checking account. They must account for your monthly expenses and savings needs and overall track your money movement. 

Later when you can add an emergency fund account to your list because that helps you ready for any unforeseen expenses. 

The three accounts are at least that you should hold at any stage of your life to manage your finances smoothly.

  • Savings account
  • Checking account
  • Emergency account

If you have any special requirements or want to start a business then you can add a few more accounts only as per your needs. 

For example, if you want to invest in stocks then you can add an investment account or a business account only if you are starting a business. 

Summary 

Bank accounts help keep your finances organized and accessible as per your needs. You need to be sensible by understanding your money flow first and your financial needs. 

Based on which you can open any number of bank accounts as per your financial goals and needs because maintaining all the accounts is a waste of time and effort. 

But having a sufficient number of bank accounts helps you manage your money efficiently.

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