Exactly how many bank accounts should you have? Well, at a minimum, two bank accounts will work for simple money management.
If you have a savings account and a checking account, those are the basics that you need to manage money.
But, of course there’s a caveat….
If you really want to manage your money effectively, you’ll need more than just one savings and checking account.
In this post, I’ll share exactly how many bank accounts you need to manage your money and what kind you’ll want to open.
Is it a good idea to have multiple bank accounts?
Before I jump into the bank accounts that you should have, you probably want to know if and why having multiple bank accounts is even a good idea.
Well, truth is that it’s actually a great idea to have multiple bank accounts. Having more than one bank account allows you to separate and manage your money more efficiently.
Why you should have multiple bank accounts?
There are several reasons why you would want to have multiple bank accounts. At the top of that list is to organize your money. Having separate bank accounts for separate financial goals makes it easier to see how you’re actually progressing. You can see where all of your funds are at and when it’s time to spend, you have designated accounts to spend from.
Another reason that you would want multiple bank accounts if you own a business. In this case, you would want to separate your personal finances from your business.
And, if you’re married, you may choose to have separate accounts for discretionary spending outside of your joint accounts.
There are so many reasons why having more than one bank account would make sense for your finances. So if it makes sense for you, go for it!
Types of Bank Accounts
Let’s talk about the type of bank accounts that you can have. Here are the most common types of bank accounts for everyday money management.
A checking account is meant to hold money for the purpose of spending. This account would be used for things like daily transactions and paying bills.
There really is no incentive for holding your money in this type of account outside of immediate access to funds. Checking accounts allow you to withdraw cash from an ATM or to make purchases online or in-store with a debit card.
As the name suggests, a savings account has the primary purpose of helping you save money. This is where you put your money away so that it can grow and, ultimately, help you build wealth.
Savings accounts have the incentive of allowing you to earn interest on your money so that your funds can grow. Online savings accounts typically have the highest interest rates and are my recommendation for savings accounts.
Money Market Account
Money market accounts or MMAs are very similar to high yield savings accounts. However, they tend to earn more interest and have some features of a traditional checking account– such as checks and an ATM card. This makes funds more readily available, although you may incur some transaction limits.
Contrary to savings accounts, an MMA may require a higher minimum balance.
8 Bank Accounts That Every Family Should Have
1. Bills (General Checking Account)
Must have bank account one is your bill account, or what I like to call a general checking account. This is where your paycheck(s) will come before dispersing the money out into other accounts.
Now, you can also use this account to set up auto payments for your bills so that you don’t have to even think about paying bills, but they get paid for you.
When I say bills, it doesn’t necessarily have to all be bills. When you transfer money to a savings account, that can be considered a bill.
Nonetheless, you need to have one account that is your hub to put your money before you disperse it based on your budget.
2. Emergency Fund
The second account that you must have is an emergency fund.
An emergency fund is three to six months or even more of your monthly expenses.
So if your monthly expenses are $1,000, then for three months, you would need to have $3,000 saved. For six months, you would need to have $6,000 saved, so on and so forth.
You want to make sure you have something in case someone loses a job, someone isn’t able to work or the worst happens, and you need to have a large sum of money.
Where To Put Your Emergency Fund
This emergency fund should be kept separate from your general checking account.
I recommend putting your emergency fund in a completely different bank that you can’t immediately access. So if you get tempted to somehow buy some expensive product, it’s not very easy to get that money; however, if you need it, it is available.
This should be a savings account that doesn’t necessarily have a debit card.
You want to also think about putting this in an online bank because you get the advantage of a higher percentage rate or annual percentage yield. This means each year or each month, the bank will pay you for having your money in that account.
It’s essentially free money!
So you want to put that money away in a savings account, maybe online, but away from money that you will be able to access on a daily basis. Again, this is three to six months or more of your monthly expenses.
3. General Savings (short term emergency fund)
The third must-have bank account that you need is a general savings account, or a smaller version of your emergency fund.
The whole purpose of this account is to fund any immediate emergencies where you can’t necessarily wait two to three business days for the money to transfer from your emergency fund.
It should be something that you can access immediately, whether that’s by going into the actual bank or being able to transfer it to your checking account.
This is strictly for the smaller scale emergencies, not necessarily like a job loss or something that’s long term.
This is not to subsidize your overspending in your checking account. It is literally to have money set aside in case you really need it for emergencies very quickly.
The fourth account is a travel account.
I consider a travel account to be a sinking fund. A sinking fund is just an account that you put money in every month with the intent of spending.
Set up a separate checking account that’s dedicated to travel. You can transfer money periodically into that account so that when you’re ready to go on a vacation, the funds are already there.
The great thing about having a travel account is when you travel, you only use the debit card associated with that account. So you already know what our spending limit is.
You will have a card specifically for travel so you can book your flights, hotel room, pay for our food and any gifts that you want to buy, all with that debit card.
That’s how you can afford to take a vacation–having an account that you periodically put money into. Whether that’s every two weeks or every month, you can save for those vacations well ahead of time.
The fifth must-have bank account that I recommend is to have is a home account.
Now, even if you don’t own a home just yet, if you’re planning on owning a home or purchasing a home, it is great to have an account that you can put money aside to save for the down payment.
In our case, we use it to save for periodic repairs, upkeep or other things for the house.
Much like the travel fund, you can put money in it every two weeks or every month. That way, when it comes time to pay for stuff like mulch in the springtime, the money is already there.
It’s very important that you have money set aside because things are going to happen as a homeowner. If you’re saving for a house, you want to be able to have the funds available for your down payment and other expenses.
This account is maintained so that you can have money to pay for things like oil changes, new tires, any car repairs, or when you want to buy a new car.
The money will already be set aside so that you have the funds available to make those purchases.
It’s just like the travel account or the home account. You put money in that account every two weeks or every month so that the money is there when we need to spend it.
If you have a vehicle you should have car account. You don’t want to be blindsided when you have to pay for expensive repairs. Instead, have some money set aside.
Even if it doesn’t cover the whole cost of the repair, you will still have money available to help subsidize the overall cost of it. So definitely have a car account if you have a vehicle or if you plan on buying a vehicle.
Consider having a savings account that you use specifically to save money for your kid(s).
As your child grows, that money can be used to pay for things like camp, maybe tutoring, or school clothes–all those expensive things that kids “have” to do.
If someone were to give you money towards your kid(s), you can always put that money in this account, so that they have funds to pay for things that they want to do in the future.
So if you have kids, or if you’re trying to have kids, or if you plan on having kids, this is definitely an account that you want to consider having so that you have funds available to pay for those expenses that come along with kids.
8. Christmas account or account specific to your savings goals
Lastly, must have bank account number eight is a Christmas account.
So we know that Christmas comes every single year on the same day. Why not go ahead and have money set aside to pay for those gifts throughout the year?
You can open an account and begin transferring money each month or every two weeks that you get paid so that when December comes (or when Black Friday gets here), you have money to pay for those gifts.
This is another example of a sinking fund where you put money in with the intent of spending it.
Now if you’re not too keen on having a Christmas account, definitely have an account that’s designated for any other goal that you may have. You may be saving for a wedding or for a big purchase.
It is a psychological fact if you name what you are saving for, you are more likely to save for it. So make sure you have an account specific to whatever financial goal you have.
Should you put all your money in one bank?
With multiple bank accounts, you have to wonder if they should all be with one bank. I recommend that you never put all of your money in one bank.
Though it may seem like the convenient thing to do, it is also the most risky. It’s akin to putting all of your eggs in one basket–something you should never do.
Instead, I recommend having at least two banks that you use so that your money is spread out. That way if something catastrophic happens and you can’t can’t access your funds from one bank, you’ll always have a backup.
I also suggest having at least one bank that you can physically go to in case the need arises. For example, you may need to have a cashier’s check written and you would need to go into a bank for that service.
How to manage multiple bank accounts with different banks
Managing multiple bank accounts might seem like a task, but I assure you that it’s not! With the help of online banking and budgeting apps, you can see all of your accounts at once.
Automating your finances can also take the work out of manually managing these accounts. This includes automating transfers to your savings account and bill payments from your bill account.
Final Thoughts on the Number of Bank Accounts you Need
As I first mentioned, it’s possible to manage you money with just two accounts. However, if you want to be more organized in your journey to build wealth, you ‘ll need more than just two.
I recommend eight accounts, but it really is up to you and your financial goals.