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How Many Bank Accounts Do You Need?

Discover the benefits of multiple bank accounts, how each can be used and how many you need

Is it really beneficial to have multiple bank accounts? At one point or another, you may have wondered how many bank accounts you should have. With so many checking and deposit accounts to choose from, it can be tricky to decide if you have too few, too many or just enough. The short answer to this conundrum is that the number of accounts you should have depends on your financial goals and your ability to meet account requirements. Read on to discover the benefits and considerations of opening several accounts online and find out which of our accounts will work best for you.

Familiarize yourself with your account options before deciding which ones to open

When considering whether or not to open multiple bank accounts, it's important to remember that certain accounts could be more effective for meeting long-term rather than short-term savings goals. Additionally, some accounts offer the benefit of a higher interest rate, while others give you more flexible access to your funds. The challenge when determining how many bank accounts you need is to make sure that all are being used efficiently to grow your funds.

  • Checking - Checking accounts are transactional accounts, meaning you can use a check or debit card to access the account for daily financial transactions. Checking accounts are convenient because you can access your funds quickly by using your card at the store, paying bills and making transfers through online and mobile banking, or stopping at a bank or ATM. You can also set up direct deposit from your paycheck to your account. While checking accounts are ideal for everyday activities like buying groceries or paying bills, deposit accounts are more effective for saving money. However, interest checking accounts are available and may be especially beneficial if you maintain a higher balance on your account and can capitalize on the interest rate.

    How many checking accounts should you have? This is truly up to you. Some people prefer to have one checking account and multiple deposit accounts; others prefer to have one main account and a second interest checking account to save more on the funds they have allocated for short-term spending goals.

  • Savings - Personal savings accounts are deposit accounts, which mean they are designed to hold funds for a longer period of time. They also have the ability to earn interest unlike most checking accounts, and often have some transaction restrictions. Some savings accounts can be accessed by debit card or check for an additional fee, but you should consult your account documents to be certain. When you're saving for short-term goals, these accounts may be a good choice since the funds are easily accessible. Savings accounts also provide a convenient place to set aside money before it is reallocated to other accounts with higher interest rates and higher balance requirements. It's important to be mindful that standard savings accounts often have lower interest rates than money markets or certificates of deposit, which are explained below.

    How many savings accounts should you have? Savings accounts are a great way to plan for multiple short-term goals. Since there are minimal balance and withdrawal requirements compared to other deposit accounts, you can open as many as you need to efficiently manage your budget and goals. For example, use one to save for college, a second to save for a home, a third for an emergency fund, a fourth for an upcoming vacation and a fifth to build up retirement funds until you can contribute them to a certificate of deposit.

  • Money market - Money markets are a type of deposit account with a higher interest rate and more limited withdrawals. However, you can usually write a set amount of checks per month as needed. Money markets require a higher minimum balance than other deposit accounts, but in exchange for leaving a large amount of your funds regularly untouched, they generally have higher interest rates than personal savings accounts. Keep in mind, there is often a fee if you dip below the minimum balance or exceed the withdrawal restrictions. For this reason, money markets are ideal if you have a larger sum of money that can be set aside for an extended period of time.

    How many money market accounts should you have? If you're saving for a long-term goal, you may only need one money market account as you can regularly contribute to the account and build up the balance. However, you can choose to open more than one to save for various long-term goals.

  • Certificate of deposit (CD) - With a CD, you'll make one large, initial deposit, and then allow it to accrue interest, untouched, for a predetermined amount of time. Withdrawal restrictions are tighter on certificates of deposit, unless you have one with a breakable, and you'll end up paying significant fees if you decide to withdraw funds before the agreed-upon date. In exchange for leaving your funds untouched until the CD's maturity date, banks generally offer a higher interest rate than with savings accounts. For this reason, certificates of deposit are often used for growing a retirement nest egg or saving for another significant, long-term goal.

    How many CD accounts should you have? Since funds in certificates of deposit must be kept untouched until they mature, there may be benefits to opening more than one CD, especially if they mature at different dates. This can allow you to stagger your CDs to mature when you need them for various goals.

More information

Need some help fitting saving into your budget? Come in for a Citizens Checkup at your nearest Citizens Bank branch.

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