There is a common belief that in order to be financially successful, you must have several bank accounts. While this can be true, it is not a necessity. Having too many bank accounts can make it difficult to manage your money and it can become overly complicated to track your spending. So, we have cut down the list of accounts to the ones you should have. If you are a business owner or you need more accounts for work, then you may need more–these are just what we recommend for personal accounts.
1. Checking Account
A checking account is necessary so you can start using a debit card rather than paying in cash. These accounts allow you to get direct deposits from your employer, so you can keep all of your earnings in one place. Checking accounts usually come with fees, so there is no reason you should be opening up multiple accounts. As mentioned above, most business owners prefer to have a separate account for their business earnings, and this is a great idea. We recommend only opening another checking account if you feel it will make managing your money easier, rather than more complicated.
2. Emergency Fund Savings Account
Emergency funds are savings that usually can cover one to three months of expenses. They are used for when dealing with financial hardship like losing a job, a natural disaster, or something disastrous happening to your home. Emergency funds are typically placed in a standard savings account through the account owner’s primary financial institution. Any savings account that allows you to make substantial deposits and will allow you to make a large withdrawal when you need to will do the trick. For more information on emergency funds, you can read our article, “How Much Money Should I Have in an Emergency Fund?” It will give you the information you need on how much to put into this savings account and why you should start an emergency fund.
3. Retirement Account
Planning for the future financially is very important, especially when planning for retirement. To help you plan for the future, there are many different options when it comes to saving for retirement. You should do your research and select which option is best for your circumstance before investing in your future. You may not opt for a standard high-interest rate savings account with retirement. Instead, you may want to invest in employer-sponsored 401Ks, IRAs, or HSAs. Or, you may want to invest in a different non-employer-sponsored account. For some more information on different retirement accounts, our article, “Preparing for the Golden Years: Your Path to Financial Freedom in Retirement,” will be very resourceful.
In total, there are only three accounts every individual needs in their adult life. As mentioned above, there may be reasons you need additional accounts, like for business purposes or saving for a down payment on a house. If you ever need guidance with managing your bank accounts, please contact one of our financial professionals.
This article is for informational purposes only. Please be advised that this article is not intended as legal or tax advice. PPG-139592 (1/20)(Exp. 9/20)