Do You Have Too Many Bank Accounts — or Too Few?

These days, bank accounts can do a lot. They make it easy for you to track your spending and receive transaction alerts, often in real-time. They allow you to transfer between accounts and even send money to others in just seconds, even from a smartphone. And many of these accounts also help you reach your savings goals with budgeting tools, automation and competitive interest rates. However, odds are that you won’t be able to achieve all of this with just one bank account. Here’s a look at how many bank accounts you should realistically have and why you truly do need more than one.

Why You Need a Checking Account

A checking account is intended to be an everyday transaction account. It allows for both deposits and withdrawals and can be used for a variety of day-to-day spending.

You’ll typically use your checking account as a landing pad for your paycheck, before re-allocating funds elsewhere. From your checking account, you can pay bills, make daily purchases, transfer funds and more. These funds are usually considered short- to medium-term in nature, as they are constantly being spent and replenished.

Money in a checking account can be accessed a number of different ways, depending on the financial institution and even the specific account type. Generally, though, checking accounts offer a combination of debit cards and paper checks, as well as online transfer options.

Why You Need Savings Accounts

Savings accounts, on the other hand, are better suited for medium- to long-term funds, rather than daily spending. The money you keep in a savings account can be tagged for a range of future savings goals, from next month’s vacation fund to your child’s college savings and beyond.

These accounts may be linked to other bank accounts you hold, such as checking. That way, you can easily transfer funds over and track your savings progress. Some banks also allow you to use a linked savings account as automatic overdraft protection on your checking account.

Additionally, most savings accounts offer interest on the balance held. This is often much greater than the interest offered on your checking account (if that account accrues interest at all). This can help amplify your savings and ensure that your money is always working for you.

While you are generally allowed to make as many deposits into a savings account as you’d like, you’re limited in the number of withdrawals you can make in a single statement cycle. Per Regulation D of the Federal Reserve, deposit accounts classified as “savings” are limited to no more than six withdrawals per month. If you exceed that limit, you may incur a fee or see your account closed.

How Many Bank Accounts Should You Have?

So, the question is, how many bank accounts do you actually need? And the answer really depends on your financial situation and your goals.

In general, you should aim to have at least the following bank accounts.

• One account for everyday spending: You need at least one checking account for day-to-day transactions. This account is typically where your paycheck will be deposited, and is what you use for small purchases and payments.
  
• One account for short-term savings: Short-term savings goals might include vacations, holiday spending, the down payment on a new car or other big purchases. Choosing a high-yield savings account can help boost your balance without extra effort.
  
• One account for long-term savings: Longer-term savings goals might include emergency savings, college expenses or the down payment on a future home. Since these funds don’t necessarily need to be immediately accessible, you can afford to choose a bank that offers competitive features and returns.
  

You might also consider opening a separate bank account for:

• Monthly bill-paying or budgeting: If you use the envelope method for budgeting, or simply want to set cash aside for monthly bills, consider using a separate bank account. This can make it easier to track spending throughout the month. It also ensures that you always have enough money available for important bills.
  
• Specific savings goals: You may already have emergency savings, retirement savings and even college savings accounts. If you have smaller, specific savings goals, though, you may even want to open separate bank accounts for those. For example, this could be where you keep savings for this season’s Christmas gifts, so you aren’t bombarded with expenses at the end of the year.
  
• Separate/shared household funds: Yours, mine and ours — that’s how many of today’s couples choose to manage their finances. It may make sense for you and your partner to each have individual bank accounts (even if it’s just for your own guilt-free spending money) as well as one joint “household” account. In this case, you’ll need at least three bank accounts between you.

What to Keep in Mind

Whether you decide to have two bank accounts or 12, there are few things to keep in mind.

Some bank accounts have fees. Certain checking and even savings accounts may charge monthly maintenance fees. These fees are often waived if you meet certain deposit or average balance thresholds; if you don’t meet these requirements, though, the costs can really add up quickly.

Make sure you’re maximizing interest rates. Right now, according to the FDIC, the average savings account has an APY of just 0.06%. However, you may be able to earn much, much more than that by shopping around for a high-yield account, like those offered by many online institutions.

Keep good records of your accounts. The more accounts you have, the easier it is to mix them all up or even forget about some small savings you set aside. Make sure you keep good (but secure) records. You may also want to make a note of these accounts in an In Case of Emergency (ICE) folder, in case something were to happen to you and your spouse needed to manage the funds.

The Bottom Line

For most adults, a single bank account isn’t enough to juggle incoming funds, manage daily spending, and save for future financial goals. How many bank accounts you need really depends on how you manage your money and what your personal goals are, both short- and long-term. For some folks, two or three bank accounts might be perfect. Others could need 10 or more to meet all of their needs.

Tips on Banking

• A trusted financial advisor can help you determine which bank accounts are necessary and how they should best be managed. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• If you’re investing on your own, you should be prepared for what the investment markets can throw at you. SmartAsset is here to help you on your investment journey, with a number of free online resources.