It may be necessary to have more than one bank account to best meet the needs of even fairly simple household finances. Bank accounts are financial tools. You probably need a checking account for frequent transactions like paying bills and withdrawing cash. If you want to maximize the interest you earn, you could open a certificate of deposit CD account or multiple accounts if you want to set up a CD ladder.
If you run your own business, or have regular business expenses, it makes sense to separate your business accounts from your personal accounts. This can make deducting expenses easier at tax time and can help make it easier to evaluate the performance of your business activities. Retirement accounts like IRAs are designed to have individual owners, so those need to be separate. As for more day-to-day banking, it might be easier to keep track of your balances and transactions if you and your spouse have separate checking accounts.
Since this ceiling applies to each account holder at a given bank, you can insure larger amounts of deposits if you spread your money among multiple banks. Picking the right tool for the job comes down to understanding what purpose each different account serves. There are a lot of options, but these descriptions can help you navigate your choices:. It allows easy access to your money. The main thing about checking accounts is that they are designed for frequent transactions.
Your pay comes in. You pay bills. You buy things. You withdraw cash. All of these tasks can readily be handled by a checking account. Many of these tasks can be automated. You can arrange to have your paycheck directly deposited, and automatic bill-pay can make sure you keep up with regular expenses without having to write checks continually.
Many times, though, convenience comes at a cost. Most checking accounts charge a monthly maintenance fee, and there are additional fees for things like overdrafts and ATM usage. Depending on how you use your account, these fees could amount to hundreds of dollars a year.
However, there are ways you can avoid the monthly maintenance fee:. Although many checking accounts pay some interest, fees are so large that they should be the primary factor you consider when choosing a checking account. For most customers, the size of these fees easily outweighs the amount of interest you could earn.
But do you know how many savings accounts you should have? If not, this guide can help you make the decision on the right number of accounts to open and maintain. One email a day could help you save thousands Tips and tricks from the experts delivered straight to your inbox that could help you save thousands of dollars. Sign up now for free access to our Personal Finance Boot Camp. By submitting your email address, you consent to us sending you money tips along with products and services that we think might interest you.
You can unsubscribe at any time. When it comes to savings accounts, there's no such thing as too much of a good thing. In most cases, banks will allow you to open multiple savings accounts if you want to do so.
Opening a savings account doesn't hurt your credit score -- unlike opening too many credit cards at once. If you choose savings accounts that don't impose monthly fees or have account minimum balance requirements, opening multiple accounts also won't cost you any money either.
The only limitation on how many savings accounts you can have at one time is the number of accounts you need and can manage. Not only can you open multiple savings accounts, but it's actually a really good idea to do so. That's because you should have lots of different savings goals and should be putting aside money on a regular basis to accomplish all of them.
If you create a separate savings account for each different savings goal you have, you'll reap many benefits. Some of the advantages of having a separate account for each goal include:. Since it's a good idea to have a savings account for each financial goal you're working towards, you'll need to make a list of the financial goals you want to work towards currently. Then open an account for each of those goals. Some of the different types of savings accounts you may need include:.
Of course, you'll also need accounts to save for retirement and for college for your kids. But those accounts shouldn't just be standard savings accounts -- you should look into accounts that provide tax advantages, such as a k or IRA for retirement savings and a for college.
If you qualify for a health savings account because you have a high-deductible health plan, you should also open a health savings account with a broker that offers one. If you don't qualify for an HSA, it may make sense to just have a standard savings account for healthcare expenses to help you cover out-of-pocket care costs. Managing multiple savings accounts is pretty easy if you open all your accounts at one bank.
Be sure to choose a bank that provides a good annual percentage rate APR so you can earn the maximum return on the money you invest. Make sure the account doesn't impose minimum balance requirements, either to avoid fees or to be eligible to earn the advertised interest rate. Since you'll be spreading your money among multiple accounts, it may be harder for you to meet those requirements. Once you have your accounts open, you should allocate transfers of the appropriate amounts of money to each separate account.
Ideally, the money will move automatically from your checking account to savings as soon as you get paid so you don't take a chance on not meeting your financial goals. Deciding how much to transfer to each savings account requires careful budgeting, as well as detailed goal setting.
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