How many bank accounts should you have?

Keeping track of your income and expenses is hard enough with one bank account, but there are valid reasons to have two, three, or even more.

For instance, business owners should have a business checking account to separate their personal finances from those that are business-related. For individuals pursuing a long-term savings goal, such as a down payment on a house or a college fund for their kids, a high-yield savings account would be beneficial.

But no matter which, or how many, accounts you have, you’ll need to be smart about managing your finances in multiple locations. If you plan to open more than one bank account, each additional account must serve a unique and necessary purpose.

With that said, here are a few basic accounts every individual should have.

Unless you work with cash alone (which would be wildly impressive in this day and age), having at least one checking account is a no-brainer.

A checking account is the ideal home for the money you use for day-to-day purchases. With a checking account, you can make deposits and withdrawals often and with ease, get your paychecks automatically (and early), and send money to friends and family electronically (depending on the bank you select).

Some people prefer two checking accounts, so they can divide their bills from nonessential purchases. And since some checking accounts offer sign-up bonuses as an added incentive, two accounts may benefit you in more ways than one.

Read more: Best checking account promotions

Although checking accounts have very few fees, if any (especially if you opt for an online checking account), interest rates are typically quite minimal. Check out the average rate for a checking account according to the Federal Deposit Insurance Corporation (FDIC), and competitive rates rarely exceed 1%.

As such, earning money is not the purpose of checking accounts. They’re designed to store your funds in a safe location while providing easy access to cash when you need it.

Read more:

Savings accounts are built differently than checking accounts.

Most savings accounts have a minimum balance requirement and only allow a limited number of withdrawals per month. This is because, as the name indicates, savings accounts should house the money you intend to save.

Because of that, savings accounts typically offer higher interest rates than checking. See that same link above from the FDIC. However, there are lots of accounts, particularly high-yield savings accounts and money market accounts, that offer multiple times over that average (especially online savings accounts).

Read more: Best savings accounts promotions

Even if you don’t have a specific savings goal right now, everyone should have at least one savings account for emergencies. There are a few different options:

Basic savings account – A traditional savings account typically has a minimum balance requirement and limits the number of transactions you can make per month, but also offers higher interest than a checking account. See our picks for the best savings accounts.
High-yield savings account – A high-yield savings account is a unique type of savings account that provides the opportunity for even higher interest earnings than your basic savings account. See our picks for the best high-yield savings accounts.
Money market account – A money market account is a type of hybrid savings and checking account. They typically come with a debit card and checks, like a checking account, with higher interest and fewer transactions, like a savings account. See our picks for the best money market accounts.

As we’ve established, everyone needs a savings account for emergencies. But if you have other savings goals — such as buying a car or saving your first $100k — you should open a separate account for these funds if the amount isn’t going to be invested.

The primary difference between your emergency fund and your goal fund is that the latter, ideally, should be accessed only once. For example, the account you use to save for a house should sit undisturbed until you’re ready to pay the down payment. Meanwhile, your emergency fund may be tapped multiple times in a year (although we hope you won’t have to).

There are a few savings account options you can consider for long-term goals, just like for your emergency fund, but the right account is dependent on the specific goal and timeline.

For instance, if you’re saving for an MBA program you want to pursue at some point in the future, a high-yield savings account with a high interest rate and limited transactions may be an ideal fit. If you want to save for vacations, however, maybe a money market account would provide the combined rate and accessibility you want.

If you know you won’t need the money for your goal for a few years, a certificate of deposit (CD) is another option to consider. With a CD, the interest rate increases the longer the term (between three months and five years), but you’ll suffer a steep early withdrawal penalty if you pull the cash before the term ends.

Read more: Best CD rates

As a final note, while you might think of retirement as another “long-term savings goal,” it is separate from the goals discussed here. For your retirement savings, consider an account like a Roth or traditional IRA.

Depending on your lifestyle, goals, and career, there are a few additional bank accounts that could benefit you.

Business bank account (for entrepreneurs)

I transitioned from a 9-to-5 writing job to full-time freelancing a couple years ago, and this year I hired an accountant to help me get organized. One of the first changes he insisted I make was to separate my business and personal finances.

There are a number of reasons why funneling business costs and earnings through a separate bank account is a wise idea, but perhaps the most important is to protect you personally. Connecting your business bank account with an employer ID number (EID) instead of your social security number (SSN) can prevent a thief from accessing your identity. A business bank account also simplifies your tax preparation, so you can avoid missing deductions and spend less time hunting down information for your tax return.

As your business grows and you consider changes such as adding a business partner or even selling your business, having an established relationship between your business and the bank can also help streamline those transitions.

Read more: Best business checking accounts

Foreign currency account (for cross-border bankers)

If you regularly transact in foreign currencies, a foreign currency account can help you minimize exchange rates and transfer fees, as well as keep track of your money that’s coming and going in different currencies.

This type of account can be beneficial if you own a business that operates in multiple countries, but it can also benefit those who travel often, since it allows you to hold money in multiple currencies all at once.

Note that these accounts typically offer a lower interest rate than traditional savings accounts, and some also require you to maintain a high minimum balance.

For every smart investor, there are two main reasons to keep multiple bank accounts:

To have liquid cash available when you need it (applicable to checking accounts, primarily).
To increase your wealth by letting your savings grow at a moderate interest rate (applicable to traditional savings accounts, high-yield savings accounts, etc.).

We advise attaching your checking account to your savings account for more effortless transfer between the two. To achieve savings targets, you could also open multiple separate accounts.

Here are some of the main benefits of operating more than one bank account.

Meet several saving goals

One of the main rationales for opening multiple savings accounts is to track the amount of money you can set aside for each individual savings goal.

For instance, if you want to save for a down payment on a home, set money aside for next year’s vacation, and also build up some funds for emergencies, you could open three separate savings accounts and deposit money into each of them. This will help you organize your goals and monitor how close you are to achieving each of them.

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 up to $250,000 for each individual — per depositing institution.

Consequently, if you have $500,000 invested in a single savings account, your investment will be at risk. In this scenario, you will only be able to get back $250,000 of your $500,000 investment if your financial institution goes bankrupt. However, if you divide the savings and invest $250,000 into two separate savings accounts at two separate banks, 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 wise to invest your savings into different accounts.

Suppose you have $100,000 and invest all of it into a single online investment bank. If that institute goes under, it will still take time for you to gain access to funds through the FDIC. Dividing your investment into multiple savings accounts, on the other hand, ensures that you will have access to some funds to meet your needs.

Get different perks from different banks

Every bank has varying offers, interest rates, and balance requirements.

For example, one institute might offer a lower fee on international transfers while another may provide a debit card that guarantees 1.5% cash back with every retail purchase. By opening multiple savings accounts at two or three banks, you can receive different benefits associated with each different account, such as high interest offerings and transaction perks.

Test out various bank accounts

The proof of the pudding is in the eating. Sometimes, it is only possible to judge the service and benefits of an account after you have had a taste of that particular account.

When researching potential accounts, you will generally narrow the field down to two or three options. If you are not sure which one to open, why not try all three?

As long as you can meet the bank or credit union’s requirements, there is nothing wrong with opening multiple accounts. If you don’t like the services, you can shut down the other accounts and transfer funds to the bank you want.

Your gut may say that keeping your accounts all in one bank makes the most sense, and there are certainly reasons to do so.

Keeping your accounts at one institution makes tracking your income and expenses simpler. You can monitor your spending habits and watch your savings grow all on one screen. Transferring funds between accounts is also much easier if those accounts exist within the same financial institution.

However, there are also plenty of reasons to open accounts at a different bank. For one, if your financial institution went bankrupt, you could suddenly lose all your savings. Additionally, keeping all your money at one bank would mean missing out on the bonuses and perks available at other institutions.

For example, if you opened a checking account with an online bank, you’d likely bypass the many fees associated with brick-and-mortar competitors. However, you’d also forfeit access to in-person customer service with competitors like Chase Bank, which provides physical branches for their account holders. Check out our Chase Bank review to read more.

Having multiple bank accounts is certainly beneficial, but it can also be overwhelming. Fortunately, managing several accounts doesn’t have to be complicated. Here are two quick tips to help you keep track of your finances.

1. Use a personal finance app

Even though your funds are divided across multiple accounts (and perhaps institutions), a personal finance app can help you track all of your cash in one location.

I used Mint for years and was able to view all my accounts and budget categories on one screen. It made tracking my spending habits so much simpler and reaching savings goals that much more realistic.

No matter which personal finance app you select, everything will be organized in an easy-to-digest format, so you can gain a comprehensive picture of your finances. As a final incentive, most of these apps are completely free!

2. Only open what you need

One of the benefits of opening multiple bank accounts is the opportunity to receive various perks tied to different accounts. However, this should not be your primary motivation.

Before you open a fourth or fifth account, make sure that addition fits your lifestyle and goals. Can you keep track of the money in that account as well as the details associated with it, such as its minimum balance requirement and transfer fees?

There are many great reasons to add another bank account, but make sure you think about the potential drawbacks and responsibilities as well.

Having multiple bank accounts can be very advantageous, because it ultimately offers greater freedom by broadening your financial opportunities.

At the bare minimum, we recommend opening at least two accounts: one for checking and one for saving. However, depending on your personal budgeting habits, lifestyle, and goals, you might benefit from some additional accounts.

For example, if you’re saving up for a house, consider two separate savings accounts for emergencies and a new home. If you own your own business, you should add a separate bank account for business income and expenses.

By holding several bank accounts, you can make the most of FDIC coverage, test out different financial institutions to find the best fit, and even earn perks associated with varying accounts. However, the number of accounts you should open depends ultimately on you.

How many bank accounts should you have?

1. Checking account for the day-to-day

2. Savings account for emergencies

3. Savings account for long-term goals

Additional bank accounts to consider