How Many Bank Accounts Do You Really Need?

By May 7th 2016

Emergency savings, rewards checking, CD ladders -- personal finance experts certainly have plenty of savings strategies to recommend, but for the average person, a new bank account to satisfy each one just isn't realistic. So when you want to make the most of your money, how many checking, savings and other types of accounts do you really need?

Unfortunately, there's no one-size-fits-all savings strategy, and it all depends on your personal goals. However, if you can identify your main objective when it comes to your money, then you can decide what [|]types of bank accounts[:|] (and how many) will get you there. Below are three common goals and which accounts are needed to accomplish them.

[Related – Understanding The Different Types Of Checking Accounts]

Objective #1: I want my finances to be simple.

You're not looking for anything fancy, just something to meet your basic needs and maybe earn a buck or two in interest. So let's start with the basics.

You would think that everyone has at least a checking account, but in fact, the latest survey by the FDIC of unbanked and underbanked households found there are over 17 million adults who live in households with no bank accounts at all. If that includes you, a basic checking account is a great way to get started.

But why stop there? If you're going to have a checking account, you might as well get decent interest from it. Look for a rewards checking account, which is the common term for a checking account with a great interest rate. One thing to keep in mind: Be sure any fees associated with the account don't wipe out the rewards.

Secondly, it's important for every person, regardless of income, to save some money. If you're not sure what you should be saving for, start with establishing an [|]emergency fund[:|] of at least three months' worth of expenses. That doesn't mean you need to have an account dedicated to emergency savings only, though -- once you reach that three-month minimum, treat anything over as "extra" savings to put toward a big-ticket purchase, long-term savings goals or just a bigger safety net in case of a financial emergency.

Objective #2: I'd like to get the best return possible.

If you're always on the hunt for maximum interest, the standard high-yield checking and savings combo just won't cut it. A checking account balance fluctuates too much to earn consistently high returns, and savings account rates will remain close to zero until the Federal Reserve decides to raise the federal funds target rate again (which won't happen until 2016 at the earliest).

That means you have to turn to a more powerful type of savings account -- a [|]time deposit account[:|] known as a certificate of deposit (CD). CD rates are often quite a bit higher than traditional savings account rates, and that’s because there's a little catch: You can't touch your deposit until the account matures. CD terms range from a few months to several years, but the higher interest rates are achieved by locking into longer-term CDs.

[Related – Should You Buy A Certificate Of Deposit From Your Bank]

So what if you're not comfortable making a 5-year commitment in order to earn a higher interest rate? This is when employing a CD ladder strategy can be very useful. Rather than depositing all of your money into one long-term CD, divide your funds equally among several CD accounts of varying term lengths (i.e., 1-year, 2-year, 3-year, etc.), allowing you to take advantage of long-term CD rates while still maintaining some liquidity. Generally, a solid CD ladder consists of four to five accounts.

Objective #3: I'm saving for specific goals.

For anyone who is a budget-master, using the envelope method is a great way to separate savings into individual goals and track your progress. Of course, stuffing cash into envelopes is a great way to put your savings at risk for theft, loss and pesky inflation. Instead, open a separate savings account for each major savings goals you have so you can stay focused and prevent yourself from spending the money elsewhere.

Many banks and credit unions offer goal-specific savings accounts, too -- often referred to as "club accounts" -- which reward your efforts with higher-than-average interest rates. For example, financial institutions have a holiday savings account, which will offer a higher rate than their standard savings account and charge a penalty for early withdrawal (so you can't spend the money until it's time to go gift shopping).

[Related – 5 Superior Alternative To using A Savings Account]

Just ensure you're not overdoing it -- losing track of your accounts could put you at risk for incurring fees if you dip below a minimum balance or leave the account inactive for too long. Three separate savings accounts is about the maximum; that allows you an account for things like general/emergency savings, a vacation or holiday fund and perhaps [|]college savings[:|] or a mortgage down payment.

How to Manage Multiple Accounts

If you like your finances to be kept simple, managing your bank accounts should remain fairly simple as well. It's when you have several accounts, especially with several different banks, that things can get a little tricky. As long as you stay organized, though, keeping tabs on all your accounts shouldn't take much work.

Start by opting for [|]e-statements[:|]. Paper statements are not only a waste, but often pile up and eventually get thrown out without ever being opened. Receiving statements in your email, on the other hand, just feels less burdensome and you're more likely to review them promptly. You can even set up filters in your email to direct account statements to their own dedicated inbox.

Secondly, get in the habit of using online budget tools. A free service like will allow you to track all of your accounts and balances in one place through a very user-friendly interface. Once you put in the initial work of setting up all your accounts, all you have to do is log in every week or two to check on your balances and ensure everything is business as usual.

A basic checking and savings account is all anyone ever really needs, but exploring additional savings strategies using various types of bank accounts is a great way to maximize the money you have. However, whether you take the simple route or opt for a more complex financial picture, seeking out the most competitive interest rates available will at least ensure you're not missing out on potential savings.

Casey Bond is the Managing Editor for, your source for the best CD rates, savings account rates, personal finance news and more.

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