It feels like we’re bombarded every day with advertisements on the new and exciting bank accounts that could be a part of our lives. High interest rates, sign-up bonuses and convenient policies like waived fees are all meant to entice us to sign up for another account. And while it’s sometimes a good financial idea to take the leap and open that new account, it’s also easy to stretch yourself a bit thin if you don’t keep careful track of your funds. So how are we to know when it’s a good idea to enroll in another bank? Is it ever possible to have too many accounts? Here’s a quick rundown of how many bank accounts you should have, and when to consider signing up for a new one:
Before you even think of signing up for any of the more sophisticated accounts, like a Roth IRA or a Certificate of Deposit, it’s essential that you first have a basic checking account and a regular savings account. Maintaining the right amount of money in both of these accounts ensures that you’ll have easy access to the money you need for your everyday lifestyle, along with funds you can turn to when an unexpected event, like a health crisis or layoffs at work, suddenly comes up.
Before signing up for a third account, you should first be sure to compile a dependable RAINY DAY FUND in your savings account. Some financial experts generally recommend that you have at least one month of take-home pay in emergency funds, and others suggest that you should have between three and six months’ worth in expenses. No matter who you choose to listen to, it’s important to have a substantial amount put away in your savings account so that you don’t have to rely on credit cards to pay for unanticipated expenses. So you should stick with two accounts as long as you’re still working to get your checking and savings accounts to a place of total stability.
If your checking and savings accounts are both in good shape and you find yourself with some extra cash, then you might want to start shopping around for a new bank account. The most essential step is to first set up A RETIREMENT ACCOUNT, such as a Roth IRA or a 401(k), so that you have plenty of money to lean on when it finally comes time to throw in the towel and retire. These accounts are equipped with extremely high interest rates, and reward those who start saving early, so you should open one of these before you go chasing sign-up bonuses or other types of investment accounts.
If you’ve already opened a retirement account and have a portion of your monthly budget devoted to it, you might want to open another savings account so that you won’t have to wait till you’re 65 to benefit from your sound financial practice. There are several different types of savings accounts, each with their own unique benefits and drawbacks: CD’s are great for making long-term investments but can’t be drawn from for the duration of the deposit, whereas money market accounts allow for easy withdrawal but penalize you if your account ever dips below the minimum balance. Do your research on what type of savings account most suits your needs, and by all means sign up for the right one if you have some money that might could stand to accrue some interest.
There’s plenty of other advice that’s important when looking for a new bank account. Signing up for accounts with great sign-up bonuses, for instance, might be an alluring prospect, but that doesn’t mean it’s a great idea–more often than not, there will be other accounts, with no sign-up bonuses but higher interest rates, that can earn you more money over time. And if you’re married, it might be a good idea to have two checking accounts: one that you and your spouse use to pay for shared expenses like the mortgage and childcare, and another that belongs exclusively to you and can be used for more discretionary spending.
How many bank accounts you should have depends entirely on your personal financial outlook–if you’re fresh out of college and trying to set yourself up for financial success, two accounts is the ticket, but a mother of two who has a dependable source of income might want to keep as many as five or six accounts. Make sure to do your research, and always err on the side of caution–if you’re not sure whether to open up that new account, chances are good that fewer is better.