How Many Bank Accounts Should You Have & Which Ones

There is an old saying that goes, “the more money you have, the better.”

The same, however, cannot be said for the number of bank accounts. This is because as the number of your accounts increases, it can be challenging to keep track of all your finances.

But that’s not to say that there isn’t a benefit to having a few accounts and there are definite benefits to having a bunch. In my experience, most people tend to get a checking and a savings account. You can also add an account that saves you ATM fees and another for foreign transactions.

The key to keeping all your finances organized is to start with the number of accounts that you need, are personally beneficial to you, and that you can manage in terms of keeping your finances in order while getting the full benefits of banking.

Start with a checking account

You should have one checking account that should be used for monthly expenses and purchases. I strongly suggest that you maintain enough balance in the account to meet your budgeted monthly expenses.

Checking accounts do not offer much interest, but there is usually no charge for cash withdrawals, bank transfers, or POS transactions.

Add a money market account

If your main goal is to start saving, I highly recommend opening up a money market account. A money market account is a type of hybrid savings and checking account. Money market accounts typically pay moderate interest but are limited by federal law where certain types of withdrawals and transfers from savings and money market accounts are limited to a combined total of 6 per calendar month per account. 

In a nutshell, money market accounts should be used as a secondary source of expenditure. After budgeting for your expenses, additional funds in the checking account should be moved to the money market account to help you earn a decent interest income.

An excellent choice for a money market account is the Discover Money Market Account because there are no fees at all. Additionally, there are no minimum balance fees and you can make withdrawals at over 60,000 ATMs nationwide which is super convenient. The current yield is 0.30% APY for balances under $100,000. For balances $100,000 and over, the yield becomes 0.35% APY.

Open a savings account

If you are successfully about to save an adequate amount every month, I recommend that you consider opening additional accounts to move on to better interest rates. A dedicated savings account offers a higher interest rate at the expense of liquidity. You will need to maintain a minimum required balance in the account and should not make withdrawals from the savings account.

The best type of savings accounts include accounts that are covered by the FDIC. The FDIC is a federal deposit insurance corporation that insures your bank investments of up to $250,000. Generally, you can earn an interest rate on these types of savings accounts.

The terms of the savings accounts are different for each bank. Generally, the deposit cannot be withdrawn through regular checks or ATM withdrawals. However, some banks do offer a withdrawal facility but charge a penalty for each transaction.

If you want a flexible and all-around great pick for a savings account, check out Aspiration. You’ll not only get unlimited withdrawals at 55,000 ATMs, but Aspiration will even rebate fees at one out-of-network ATM per month if you have their Plus plan. 

Plus, if you have Aspiration’s fee-free, no interest Spend and Save plan, you’ll be eligible for a $150 welcome bonus if you spend $1,000 in the first 60 days. Bump that up to a $200 welcome bonus if you spend $1,000 in the first 60 days and you have Aspiration Plus.

In addition to these perks, you’ll get up to  1.00% APY (Variable) on your balance with the Plus plan. And, spend using your debit card and you’ll earn up to 10% cash back on Conscience Coalition purchases, with no cap. Best of all, Aspiration rounds up each purchase and uses the funds to plant trees!

You’ll get all of these perks for just $7.99/month with the Plus plan (or $5.99 a month if you pay annually), or you can pay no monthly fee with Aspiration’s free plan (but you will have reduced cash back rewards).

High-yield bank account

A high-yield bank account is a type of savings account that earns much higher interest than a standard savings account. Interest rates generally start at 1.50% and go up to 3.50% for high-yield accounts. Account holders are also required to maintain a minimum balance in the account at all times, usually ranging from $5,000 to $25,000.

High-yield bank accounts are also offered by online banks that do not have a physical branch location or ATMs. If you are looking to open an online high-yield account, you may need to set up a transfer from another bank to deposit and withdraw funds from the online bank.

My favorite high-yield savings account right now is Chime.

You’ll get a 0.50% APY, plus other perks, like automatic savings and early access to your paycheck with direct deposit. 

Own a business? Add a business account

If you are conducting business as an entrepreneur, then you may want to open a business bank account and use it solely for business transactions. A separate bank account is essential both for financial and legal reasons. The business income must be deposited into this bank account, and business expenses should be carried out exclusively from the account.

A business bank account is similar to a checking account. No interest is paid on this type of account, but it is easier to withdraw and transfer money at any time, making it useful for businesses. The critical difference is that the account is named after a business instead of an individual.

If you’re setting up a separate business account, I recommend keeping things as easy as possible. That’s why I prefer online banking solutions that are made with business owners in mind, like those offered by BlueVine. BlueVine makes it incredibly easy to sign-up for a business bank account and won’t cut into your profit with hidden fees. In fact, BlueVine Business Checking currently offers a 1.00% APY, which will help your money grow with your business!

Business Overseas? Add an international or foreign currency account

International or foreign currency accounts are useful for a specific variety of clients. They are suitable for customers who need to travel abroad often for business or pleasure. Business professionals involved in international trade such as import/export or delivery of expert services overseas can also benefit from foreign currency accounts.

Regular bank accounts charge a fee for carrying out international or foreign currency transactions. The fee could range from 0.20% up to 5.00% of the transaction cost. A specialized international account charges 0% for foreign transactions. You can add an international or foreign currency account to your accounts portfolio based on your needs.

What are the benefits of having multiple bank accounts?

For every smart investor, there are two main factors to consider when keeping multiple bank accounts:

1. To increase your wealth by letting your savings grow at a moderate interest rate.
2. To have liquid cash available when you need it.

To achieve these goals, we advise attaching your checking account to your savings account for more effortless transfer between the two. You may also consider opening multiple accounts, separate from one another that help you achieve savings targets.

Here are some of the main benefits of operating multiple bank accounts.

Meet multiple saving goals

One of the main rationales for opening multiple savings accounts is to track the amount of money you can save for each individual savings goal. For instance, if you are looking to make the down payment for a new home, set money aside for next year’s vacation and keep some funds aside for an emergency, then you can open three separate savings accounts and deposit money into each of them.

This will help you organize your goals and reach them more easily letting you know how close you are to achieving each individual goal.

Hold a savings reserve

If you want to keep some money locked down for an emergency, you can put it into a liquid savings deposit that offers a reasonable return without penalizing you for early withdrawal. If you do have an emergency, you can get the money out without paying extra costs.

You can invest the rest of your money into long and short term deposits for generating income.

Make use of FDIC coverage

The FDIC offers investment coverage for each individual, per depositing institution. The maximum coverage provided is $250,000.

This means that if you have $500,000 and you invest all the money into a single savings account, then your investment will be at risk. If the banking institute goes bankrupt, then you will only be able to get your investment back for $250,000.

On the other hand, if you divide the savings and invest $250,000 into two separate savings accounts, you will be able to get coverage for all your investments.

Get access to funds in case of failure

Even if you have less than $250,000, it is advised you invest your savings into different savings accounts. Suppose you have $100,000 and invest all of it into a single online investment bank. If that institute goes under for some reason, it would still take time for you to get access to funds through FDIC.

Dividing your investment into multiple savings accounts ensures that you will always have access to some funds to meet your needs.

Get different perks from different banks

Every bank comes up with varying offers, interest rates, and balance requirements. You may find it better to open savings accounts at two or three banks so that you get the benefit of their interest rates and transaction perks.

For example, one institute might offer a lower fee on international transfers while another may come with a debit card that guarantees 1% cash back at every retail purchase. If you have varying needs, you could get multiple accounts to get as many benefits as you can.

Test out various bank accounts

The proof of the pudding is in the eating. You can open multiple bank accounts if you are indecisive about which bank to go with for a long-term savings account. Sometimes, it is only possible to judge the service and benefits of an account after you have tried it out for yourself and assessed its usefulness for your needs.

After you have researched possible investment account options, you will generally narrow the field down to two or three accounts. If you are not sure which one to go for, why not open multiple accounts in all three?

There is nothing against opening multiple savings accounts as long as you can meet the bank’s or credit union’s requirements. Then, if you don’t like the services, you can shut down the other accounts and transfer funds to the bank you want.

How to manage your multiple bank accounts

In the likelihood that you’ll end up with a bunch of bank accounts, I highly recommend looking into getting a personal finance appt that links together all of your bank and investment accounts. There are many out there, but what they all have in common is that they will help you get an excellent top-down understanding of your overall financial position.

One our my favorite apps is Personal Capital and here’s why: it has everything organized in a super easy format where you can see your networth in one screen – with the breakdown of all of your investments aggregated into one place. The app is completely free very intuitive and I’m a huge fan of their dashboard. It’s honestly easy to get addicted to.

Summary

Opening multiple bank accounts is a huge advantage because it ultimately offers you greater freedom by broadening the financial opportunities you can get. As long as you can manage the accounts, there is no problem opening as many accounts that best fit whatever your needs are.

At the bare minimum, we recommend getting at least two accounts, one for checking and the other for saving. Divide your monthly income or salary into two portions. Deposit the amount that you usually spend each month into the checking account and put the additional funds into your savings account.

This strategy will help you reap the most benefits. It will allow you greater liquidity and access to funds while also helping you to build up your wealth.

Read more

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