Do you ever feel overwhelmed trying to manage your finances from a single checking account? Between paying bills, saving money, and tracking spending, it can be challenging to keep everything straight.
Sometimes, opening multiple accounts can help you better organize your finances and make it easier to reach your goals. However, with so many different types of accounts available, you may find yourself asking “How many bank accounts should I have?”
The answer really depends on what you're trying to accomplish. In the following guide, we’ll explore several common types of bank accounts, discuss the benefits of having multiple accounts, and share tips for managing multiple accounts effectively. With this information, you’ll be able to choose the right mix of accounts to meet your financial goals.
Common Types of Bank Accounts
As you evaluate your banking needs, it’s important to understand your options. This can help you choose the optimal accounts to meet both short-term and long-term saving and spending priorities.
Checking Accounts
Checking accounts typically serve as the primary transactional account, giving you easy access to deposited funds. You can use a checking account to pay bills using paper checks, online bill pay, or your bank’s mobile app and make withdrawals using automatic teller machines (ATMs). Checking accounts also typically come with a debit card that can be used for in-person or online purchases.
Unlike savings accounts, checking accounts are designed for active daily use, allowing many deposits, withdrawals, and transfers each month. Most basic checking accounts do not pay interest. Interest-bearing checking accounts tend to have higher minimum account balances when compared to a basic checking account and may have additional fees.
Savings Accounts
Savings accounts are often used for money that's not needed for active daily spending. These accounts typically pay a small amount of interest. While there is no longer a federal law limiting the number of monthly transactions you can make in a savings account[1], your bank may still place limits on the number of withdrawals you can make each month without incurring a fee.
With a savings account, it may not be possible to pay bills using a check, online bill pay, or mobile app. However, you can access the funds by transferring money to a linked checking account or making a withdrawal at a local branch or from an ATM.
Money Market Accounts
Money market accounts pay interest at a rate sometimes higher than basic savings accounts. A money market account may have many of the same features as a checking account, including the ability to write checks, use a debit card, and pay bills online.
In exchange for the higher interest rates, money market account owners must often be willing to maintain a minimum account balance. Like savings accounts, there is also typically a limit to the number of monthly transfers that can occur out of the account without incurring additional fees.
Certificates of Deposit (CDs)
Certificates of Deposit (CDs) may appeal to savers seeking higher yields. However, CDs require you to keep the funds in the account for a set period of time to avoid incurring early withdrawal fees.
CDs offer higher interest rates than savings accounts and the interest compounds over time, making them appropriate for medium- to long-term savings goals. However, the lack of liquidity makes them impractical for those who need an account to pay bills or for shorter-term goals.
Reasons To Have More Than One Account
While it may seem simpler to have a single bank account, there are some compelling reasons to consider opening additional accounts. Having multiple accounts can help you better budget your money, save for goals, separate your finances, and maximize your earning potential. Opening multiple accounts often provides greater control over your household cash flow while giving each household member financial autonomy.
Budgeting and Expense Tracking
Creating and sticking to a household budget can be a challenge when you’re trying to monitor all inflows and outflows within a single account. Opening dedicated accounts for specific types of expenses can help you track actual spending against your targets. For example, you may consider opening one account for household bills, like your mortgage and utilities, and a second account for variable expenses, like groceries, gas, and discretionary spending.
Separating Personal and Household Funds
It’s common for married or cohabitating couples to have a joint checking account for household expenses and individual accounts for personal spending. This can help ensure there’s enough money available to cover shared expenses while also allowing each person to maintain some financial privacy and autonomy.
Goal-Oriented Savings
Multiple savings accounts can help you separate your funds and track your progress toward meeting certain goals. It can also help prevent you from overspending on one goal at the expense of meeting another. When setting up your savings accounts, you may consider opening one for each major goal, such as a family vacation, home renovations, and college savings.
It’s also a good idea to have an emergency account that holds the equivalent of three to six months’ expenses. By keeping these funds in a separate account, you can make sure you don’t tap into it unless there is a true emergency.
Some banks offer money management tools that allow you to set multiple savings goals and track your progress toward meeting them. This can help you separate your expenses and may be used as an alternative to opening multiple goal-oriented savings accounts.
Separating Personal and Business Finances
If you run a business, either as a side gig or full-time, mingling those finances with your personal money can create complications. Separating your business account simplifies your accounting when filing taxes or obtaining financing.
As a business owner, you may want to consider opening a business checking account, a business savings account, and a business credit card.
Maximizing Interest and Benefits
Rather than keeping all your funds in a basic checking account that’s earning little to no interest, strategically allocating money across accounts with varying interest rates can increase your earning potential. Keep in mind that accounts that pay higher interest rates often limit liquidity, so it may make sense to split your funds among various types of accounts that align with your timelines.
For example, if you have cash that you won’t need for three to five years and it’s enough to meet the account minimum, you may invest it in a CD. However, you’ll want to make sure you keep enough in your standard checking and savings accounts so you have cash available when you need it.
Teaching Kids and Teens Financial Responsibility
Opening a kid-friendly bank account can help children learn about saving and responsible spending from a young age. They can learn how to make deposits from birthday gifts, allowances, or earnings from part-time jobs. As they get older, children can learn how to set savings goals, use checks and debit cards, and budget for personal expenses. Parents can also help children review their transactions and balance their accounts.
Student checking and savings accounts allow older teens to manage their own funds, giving them some financial independence. This can help prepare them for when they begin earning their own paychecks or getting ready to go off to college.
Tips for Managing Multiple Accounts
While multiple accounts can provide significant benefits, having more accounts means you’ll need to keep everything organized. Staying on top of balances, transactions, and transfers prevents overdrafts while helping you ensure your money is working optimally for you.
Regular Monitoring
When managing multiple bank accounts, you’ll ideally want to log into each account regularly to review recent transactions and balances. This allows you to quickly notice and address any potential issues, such as unauthorized charges.
Monitoring your balances helps ensure sufficient funds to cover upcoming bills and payments, preventing overdraft fees caused by low balances. It’s also helpful to keep track of the minimum account balances required for interest earnings and monthly fee waivers.
Account Management Tools
Using your financial institution’s online banking dashboard or a trusted third-party personal finance platform can help you view all of your account information in a single place. By linking each of your checking, savings, loan, and investment accounts, you can quickly view all of the important information each time you log in. Your bank may have digital tools to assist with budgeting and saving goals - like PNC Virtual Wallet®.
Depending on your needs, you may also set up automatic transfers between accounts. This can help you allocate funds to specific goals and make sure your expenses are covered.
Alerts and Reminders
Configuring account alerts and reminders make it easier to manage multiple accounts. Set balance alerts to receive warnings any time accounts risk falling below the limits you define. Establish payment reminders ahead of upcoming bills or transfers and threshold alerts on debit card expenditures to help prevent overspending.
Optimizing Your Bank Account Strategy
Determining how many bank accounts to have should be based on your household financial circumstances and your personal preferences. Start with the essentials – a basic checking account and a savings account. From there, open additional accounts strategically as needed for budgeting, savings goals, and business finances, and to optimize your interest earnings.
Keep in mind that having individual and joint accounts can also help with household harmony, responsibility, and independence.
PNC Bank offers a wide range of options to meet your needs. With a full suite of checking, savings, money market, and CD accounts with online/mobile access and account management tools, we offer everything you may need to help manage your finances. Explore our personal banking accounts now!
