How many bank accounts you should have can really depend on your own personal organization preferences, but might also be dictated by your career or family life. There are certainly benefits to having multiple savings accounts or checking accounts, but juggling more than one bank account could be tough.
When it comes to managing your money, many adults have, at a minimum, one checking account and one savings account at the same bank. Of course, there are plenty of additional financial circumstances that might make you consider opening an additional account. However, for most individuals, especially those who are unmarried, opening just one checking and one savings account usually covers basic banking needs.
With just one checking account and one savings account, you eliminate confusion and can simplify your finances. If all of your paychecks go into your checking account automatically, using direct deposit, you can set up recurring automatic transfers into savings for the date after your payment hits.
This way, money moves into your savings account, while leaving what you know you’ll need in checking until your next paycheck. A number of banks, especially the larger chains, also charge monthly fees for checking accounts or require a minimum deposit to open a new account, so having only two accounts total reduces your amount of fees you’ll need to worry about.
Checking vs Saving Account
Before diving into the article further an important distinction to make is between checking and savings accounts. A savings account is usually to house money for a specific goal. This is money you store away and don’t touch for a period of time. You could house your emergency fund in a savings account or even a travel fund. In general, a savings account shouldn’t be used on a daily basis as that is money you want to put away for a specific purpose.
Checking accounts, on the other hand, are usually used on a daily basis. Where you paychecks are deposited, bills are paid from, and your daily spending is done. Many people also transfer money into their savings from their checking account so they are tempted to spend it. Checking accounts serve as your everyday account.
Should You Open Multiple Checking and Savings Accounts?
For those who are married or starting a family, military personnel or planning extended foreign travel, freelancers or business owners, there may be benefits to having multiple savings accounts or checking accounts for different financial needs.
Plus, some individuals might find they prefer having at least one or two extra savings accounts for savings goals. These savings goals could be anything from an emergency fund, travel fund, or saving up for a car.
While there is no need to open five new savings accounts to plan for your next five vacations, how many bank accounts you should have can depend on your ability to balance organizing your finances with balancing your checkbook.
While couples do not necessarily need to share all of their finances, there are certain benefits to having a joint account for your household and family. For one thing, it can help cover large monthly payments such as a mortgage, rent, or other household expenses equally. Plus, rather than an individual savings, you might want a family savings account for emergencies, like a surprise emergency room bill or car trouble. SoFi Money® makes it easy to create one single account for you and your +1, so you both have access to your money.
Having a family savings account can also be fun, putting away money for future travel or saving up for a wedding or baby. Some couples even prefer a shared account for debt payments, though paying off your partner’s debt is a bigger financial conversation to have before you start a new bank account for that purpose.
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Saving for college is another reason parents might open another bank account, or even an individual who is currently paying for school might see the benefits in having a separate checking account to manage and keep track of spending on books or other school-related costs.
However, it’s important to keep in mind that the more bank accounts you open, the more likely you might overdraft on one account to pay for another, especially if you have large automatic transfers set up, trying to put aside money in different savings accounts each month.
Most importantly, emergency savings are key to have, and whether you want this account to be a separate fund in a different bank account, or part of your overall main savings account is really up to you.
But while there is seemingly no downside at first to having several different accounts at a bank, you have to keep in mind that you risk incurring more bank fees, and you’d have to deal with the logistical nightmare of keeping track of each account’s rules and regulations.
Other reasons people might consider opening additional bank accounts would be for charity donations or offering financial assistance to another family member, such as paying for elder care. But there’s probably no reason why those monthly expenses can’t also be accounted for in your regular checking or savings account.
Why Freelancers and Business Owners May Need Separate Bank Accounts
While large businesses inevitably need their own bank accounts, sometimes smaller mom and pop stores or even individuals with side hustles overlook creating a separate checking account for their business.
Some banks offer small business accounts, which can be used by freelancers, side hustlers, or small business owners. Basically, you want to make it easy on yourself to track personal and business expenses separately, and having different bank accounts helps take care of a lot of the legwork.
An additional account makes it easy to track business expenses and deductions, like shipping costs for your Etsy account or treats purchased for your dog-walking gig. Plus, with all of your business expenses in one place, you are more prepared for an audit and have a better bookkeeping record, rather than sorting through every transaction and trying to remember if that coffee you had six months ago was for a work meeting or not.
Of course, as a business owner or freelancer, it’s also important to save for tax season, which is why opening a separate business savings account can also come into play.
Business savings accounts usually come with greater fund protection than a traditional savings or checking account. The FDIC typically insures business savings accounts up to $250,000, which protects your money in case a bank fails.
Plus, a great benefit of having another savings account for your business or freelance work is that you can set aside money specifically for taxes.
Alternate Money Management Options to Consider
Whether you are looking to open a new checking and savings account with a new bank, or just considering what works best for your financial needs, there are a number of reasons to consider an alternative bank account.
A new account could offer you better rates or features, lower fees, or greater interest earnings. Just keep in mind that some banks will run a credit report if you open a new account.
Credit unions are banks that are run as financial co-ops, meaning each member has a small stake in the business. Banking with a credit union usually allows more flexibility and lower fees. Credit unions are typically smaller than most big banks, while offering many of the same services.
As nonprofits, they are designed to serve their members, paying higher interest rates on deposits as well. If you don’t need a brick-and-mortar bank location on every corner, a credit union might be the right fit. Plus, if you are using a credit union savings account, odds are you will earn higher interest, and avoid some of those other larger bank fees along the way.
If you are looking for an alternative experience altogether, check out SoFi Money®, which is a cash management account that let’s you spend and save all in one.
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