How Many Bank Accounts Should I Have?

How many bank accounts you need depends on several factors, including savings goals, financial organization and simplification. Some people will be happy with one to two bank accounts, while others will choose four to five bank accounts for specific goals. Below you’ll find the information you need to answer the question, “How many bank accounts should I have?”

How to Determine the Ideal Number of Accounts Based on the Type of Bank Account

Different bank accounts can serve different purposes. In addition to a checking account for daily operations, you may need a savings account, money market account or certificates of deposit (CDs). For example, you might choose to keep one savings account for an emergency fund, a money market account for a vacation or other special savings goals and a checking account for everyday expenses. You also might prefer simplicity and just want a single savings account and a checking account. Here’s how each type of account works and why you might need one. 

Savings Accounts

Savings accounts are preferred for an emergency fund and other savings goals. These bank accounts allow you to deposit money and earn interest. Savings accounts are federally insured for up to $250,000 per account owner. Savings accounts offer a safe place to put your money while earning interest. Look for a high-yield savings account with 3% to 5% interest rates to maximize compound interest. 

Checking Accounts

Checking accounts offer maximum liquidity. You’ll be able to access funds through debit cards, online transfers, or by writing a check. For most people, your checking account is the first account you choose. You can set up direct deposits of your paycheck. Debit cards from the account can be the primary way to pay for everyday expenses while maintaining a budget.

You can choose between online or brick-and-mortar banks close to your home. Look for a checking account with low or no monthly fees. Some banks waive monthly account fees if you direct deposit your paycheck or maintain a minimum balance. Some checking accounts also offer ATM fee refunds, waived overdraft charges, and other benefits.

Checking accounts are insured by the Federal Deposit Insurance Corp. (FDIC) up to $250,000 per user. If you need additional coverage or want checking accounts for specific financial goals, you can open multiple checking accounts. Remember that to get FDIC benefits, the checking accounts will need to be in separate institutions. Find the best checking accounts. 

Money Market Accounts

A money market account is a type of bank account that functions with many of the perks of a savings account but with some of the flexibility of a checking account, like a debit card. Money market accounts at banks are insured by the FDIC or National Credit Union Administration (NCUA) for credit unions up to $250,000 by each account holder.

Certificates of Deposit (CDs)

A certificate of deposit or CD is a savings product in which you can earn interest on a sum for a fixed period of time. Unlike savings accounts, you can’t touch the funds in CDs for the term or you’ll risk penalty fees or lost interest. The advantage of CDs is that they typically have higher interest rates than savings accounts, but you’ll lose liquidity. 

Benefits of Having Multiple Bank Accounts

Whether you need one or multiple bank accounts comes down to individual needs. Here are some of the benefits of multiple bank accounts. 

Easy Organization and Tracking of Finances

Having multiple bank accounts allows you to separate your personal and business finances, making tracking your expenses and managing your budget easier. You also can open specific bank accounts for specific savings goals or needs. Some couples choose to share a checking account, while others have separate checking accounts. 

You could have a single high-yield savings account or multiple accounts for different savings goals. This can simplify tracking finances and make it easier to organize funds.  

Improved Financial Security 

Each type of bank account at a financial institution is federally insured for up to $250,000 per account holder. For that reason, having multiple types of bank accounts or the same type at multiple institutions can improve financial security.

But even if you don’t have more than $250,000 in a bank account, you minimize the risk of losing all your money if one account is compromised or inaccessible, improving financial security. This diversification can provide an added layer of protection.

Increased Interest Earnings 

Some banks offer higher interest rates on certain types of accounts or if you maintain higher balances. By spreading your funds across multiple accounts, you can maximize your earnings by taking advantage of these higher rates. For this to work, you need to keep the majority of funds in a high-yield savings account and only transfer what you need monthly to a checking account. 

Simplified Savings Goals

Multiple accounts can help you achieve savings goals. Dedicated accounts for specific purposes, such as an emergency fund, vacation savings or a down payment on a house, allow you to monitor your progress toward each goal more easily and avoid mixing funds or unintentionally spending savings on everyday expenses. 

Access to Specialized Service 

Having accounts with multiple banks allows you to access a broader range of services, such as investment opportunities, rewards programs, or exclusive discounts. Banks also regularly run promotions, including no-fee checking accounts or rewards bonuses when you spend a certain amount on a savings account. Having multiple accounts allows you to maximize specialized services and take advantage of specials. 

Drawbacks of Having Multiple Bank Accounts

Disadvantages of multiple bank accounts include increased fees and additional effort to track accounts. Here are the cons to weigh before opening multiple bank accounts. 

Increased Maintenance and Fees

Each bank account typically comes with its own set of fees and minimum balance requirements. Keeping track of maintaining minimum balances can take extra time. You risk additional fees or account closing if the account drops below those minimums. At a minimum, look for accounts without monthly fees. 

Time and Effort Required

When you have multiple bank accounts, you might need to transfer funds between accounts and regularly check minimum balances. You will also need to update account information in case of a change of address and ensure that all accounts remain active and in good standing. All of this takes time that may or may not be worth the nominal additional convenience. 

Increased Risk of Fraud

With multiple accounts, especially if you use similar passwords, a single compromised account can make it easier for hackers to access your other accounts as well. Protect yourself from fraud if you have multiple bank accounts by creating unique passwords and using two-step verification for bank accounts. 

Diversify Your Savings into Different Investment Vehicles

Aside from opening multiple bank accounts, consider diversifying savings into investments. Keep at least six months of expenses in a savings account, and then aim to invest the rest. Here are investment opportunities that can lead to growing wealth.  

Stocks

Stocks represent ownership in a company and can be bought and sold on stock exchanges. They offer the potential for capital appreciation and dividend income. They come with higher risks. To safely invest in stocks, diversify investments across stocks, bonds, exchange-traded funds, real estate and other asset classes. Learn how to buy stocks. 

Bonds 

Bonds are debt instruments issued by governments, municipalities or corporations. Investors who buy bonds lend money to the issuer in exchange for periodic interest payments and the return of the principal at maturity. Bonds are a lower-risk investment opportunity to diversify your portfolio. 

Mutual Funds

Mutual funds pool money from multiple investors to invest in a diversified portfolio of stocks, bonds or other securities. They are managed by professional fund managers and offer investors the opportunity to gain exposure to various assets, reducing risk. Check mutual funds’ performance records, portfolio diversification and the fund manager’s track record of choosing a reliable mutual fund. Also, check out mutual funds for specific purposes, like environmental, social and governance (ESG) mutual funds.

Exchange-Traded Funds (ETFs) 

ETFs are similar to mutual funds but trade on stock exchanges like individual stocks. They track a specific index or sector and offer investors diversification, liquidity and flexibility. ETFs are often grouped by specific purpose, like ESG or technology ETFs. 

Real Estate Investment Trusts (REITs)

REITs are companies that own, operate or finance income-generating real estate. By investing in REITs, you can gain exposure to the real estate market without owning or managing properties directly. REITs are influenced by different factors than stocks and are historically resistant to market downturns, offering strong diversification. In addition, you could invest as little as $50 in a REIT, making REITs an obvious initial step into real estate investing. 

Options and Futures 

Options and futures are derivatives that allow investors to speculate or hedge against the price movements of underlying assets. They involve the right or obligation to buy or sell assets at a predetermined price and date. As a part of a diversified investment portfolio, they offer strong opportunities even in market downturns. 

Cryptocurrencies

Cryptocurrencies like Bitcoin and Ethereum are digital or virtual currencies that use cryptography for security. They are decentralized and operate on blockchain technology. Investors can buy, sell and trade cryptocurrencies on specialized platforms. Investing a small portion of your portfolio in cryptocurrency can add to diversification. 

Before investing, assess your financial situation, determine your risk tolerance and educate yourself. Consult a financial adviser to create an investment plan that meets your risk tolerance and target returns if needed. 

Creating Savings Buckets

Multiple bank accounts can simplify saving for specific goals and maintaining a budget. Look for accounts with high-interest rates and low or no monthly fees. Beyond savings and budgeting, consider investing with a long-term approach to maximize wealth over time. With some attention to setting up accounts that meet your lifestyle, reaching new financial targets can be easier than ever. 

Frequently Asked Questions