Banking

How many bank accounts should you have? An expert says 3 are necessary, and 1 more is ideal

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  • An expert recommended having at least three bank accounts, or four if you’re financially able.
  • Have a high-yield savings account and two checking accounts. Then open a brokerage account for long-term goals.
  • She keeps her accounts at separate banks, both for security and to make it harder to overspend.
  • Compare savings account rates & offers in your area »

How many bank accounts should you have?

Mykail “The Boujie Budgeter” James, certified financial education instructor, believes people should have at least three bank accounts — or four if they’re able.

Not only does James have more than one bank account, but she keeps them at different banks.

She keeps her accounts at separate banks

Some people prefer to keep their savings and checking accounts at the same bank, but that’s not the case for James.

“You know how the saying goes: ‘Don’t put all your eggs in one basket,'” she said. “You shouldn’t have all your money in one bank.”

Her first reason for splitting up the accounts is security. In case technology fails at one institution, you have accounts at other banks to fall back on.

For example, she said that one of her banks experienced a security breach a couple of years ago, so she couldn’t use her debit card for a few days. Thankfully, she had money in a checking account at another bank to fall back on until everything was fixed.

She also said that keeping her bank accounts at separate institutions keeps her from overspending. If she kept checking and savings at the same bank, she might be tempted to move money from savings to checking on a whim, and the money would be available to her almost immediately. Or she could accidentally spend too much and not have enough left over for bills.

It usually takes a minimum of 24 hours to transfer money from one bank to another, so separating her money has helped her cut back on knee-jerk spending.

Here are the three (or four) bank accounts she recommends:

1. High-yield savings account

A high-yield savings account pays better interest rates than your typical institution. For example, a regular savings account may pay 0.01% APY, while a high-yield savings account could pay 0.50% APY.

“I’m not too picky, just as long as it’s a good savings rate,” Mykail said.

Online banks
often pay the highest interest rates, although your local bank or credit union might have a good high-yield option.

When it’s time to transfer money from savings to checking, it will take a while if your accounts are at different banks. So James pays with her credit card, transfers money from savings to checking, then pays off her credit card when the money hits her checking account. This way, she can still access savings in a pinch, and she earns credit card rewards.

2. Spending account

James keeps her spending money — such as cash for going out, buying gifts, or shopping — in its own checking account.

She recommended using a well-known online bank as your spending account. Online banks often make your money accessible, and bigger-name ones can give you information about their security measures.

3. Checking account for bills

James keeps her spending money and funds for bills in separate

checking accounts
.

She prefers to use a large national bank for her bills account. She also chose to use a bank that provides a Visa debit card, because Visa cards are widely accepted. She knew she’d be able to use it to pay any bills without risking it being denied because a company doesn’t accept it.

4. Bonus: brokerage account

You may already have a retirement account, such as a 401(k), set up through your employer. Although employer accounts are great tools for investing and saving for retirement, James recommended having an additional investment account if it’s financially feasible.

Brokerage accounts are types of investment accounts that aren’t necessarily used for retirement. You may use a brokerage account to grow your savings for a longer-term goal, like buying a home or having a child.

This is where James makes an exception to her “keep my accounts at different banks” rule. Her high-yield savings account and brokerage account are with the same bank, because she likes to be able to easily transfer money from savings into her investment account.

James receives her paychecks as direct deposits. She has set up a portion of each paycheck to go into all four accounts, making it easy to budget automatically.

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