Here's How Many Bank Accounts You Really Need

Aug 10, 2015

When it comes to your personal bank account, simplicity rules. Keeping tabs on a half-dozen checking and savings accounts -- not to mention trying to remember user names and passwords, and worrying whether you've actually picked the right account in the first place -- can feel like a full-time occupation.

Yet minimalism doesn't always work in practice. Complications abound, particularly when you add a spouse and children to your life.

To help readers understand how many bank accounts they actually need, MONEY isolated three separate scenarios: a single 20-something recently out of college and new to the workforce; a married couple in their 40s with two kids at home; and a retiree couple enjoying life in their 60s. Then we checked with a number of banking experts to help determine a no-drama banking plan for each.

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The mantra to remember: Each account should be opened and used with for a specific purpose.

Gen Y & Single: 2 Accounts

"A typical young adult needs just two bank accounts: a checking account and a saving account," says Alex Matjanec, co-founder of financial data website MyBankTracker.com.

The checking account should work as the fulcrum of the millennial's banking activity: Paychecks enter via direct deposit and bills are settled here. (With scant resources, young workers should be especially cognizant of fees; consider either Ally, named MONEY's Best Stand-Alone Checking Account last year, or a no-fee account at a nearby credit union if you'd prefer a bank with physical branches.)

The other part of the equation should be a "high-yielding savings account to help build an emergency fund for life's unexpected expenses,"says Matjanec. Only one-third of millennials have built an emergency fund that could deal with an $1,000 unexpected trip to the hospital or a $500 car repair, according to Bankrate.

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Shoot for about six months of essential expenses, and separate it from your day-to-day cash flow. "Doing this in savings rather than checking will allow the money to earn interest and help the young consumer resist the temptation to spend the accumulating balance," says Richard Barrington of Money-Rates.com, another consumer comparison site. Check out the no maintenance-fee Barclays Dream Account, currently with a 1.05% APY.

Married With Children: More Specialized Accounts

For married couples, banking needs are more complex. At minimum, most will want a joint savings account along with separate checking accounts for each spouse. "A married couple should pool long-term resources and be on the same page about long-term savings goals, but for everyday checking it is better to maintain separate accounts," says Barrington.

New savings goals may also require additional accounts. You may want to build up a down payment for a house in a CD, to gain higher interest rates while protecting your cash from the market's vicissitudes. (Synchrony Bank currently has a 24-month CD paying out 1.45% with a $2,000 minimum deposit.) In fact, think about adding dedicated a separate savings account or CD each time you conceive a new savings goal. You can even nickname the accounts, like "Kitchen Renovation," to help you keep up your savings rate.

You don't need to keep everything at the same bank; if you're willing to stomach the additional complexity, you may be able to find better options at different institutions. "Look to each account as a fresh choice of bank, and you very well might find that different banks have the best solution for different situations," says Barrington. Just make sure that, for each account, you maintain the minimum required to ensure the lowest fees.

Retirees: Scaling Back

Eventually your kids move off to college, your career winds down, and your big savings goals have -- hopefully -- been accomplished. Other than your house, the majority of your assets are probably parked in retirement and brokerage accounts. So do you still need a savings account?

"When a retired couple is in the decumulation phase of life, I believe they do need a savings account to store easily accessible cash for emergency purposes," says Ryan Wibberley, chief executive of CIC Wealth. The car and mortgage may be paid off, he points out, but it still makes sense to store six months' worth of emergency funds for less predictable items like prescriptions, other health care bills, and home or auto repairs.

Wibberley recommends a joint savings account with a transfer-on-death designation, in case you and your spouse pass away at the same time. "This way, the beneficiary could have immediate access to these funds," he says.

The size of your fund will also depend on certain tax obligations. "Most of my clients have paid-off homes, so we need to plan cash reserves accordingly for their twice-annual property tax bills," says RBC financial advisor Darla Kashian.

As for checking, Wibberley has three words of advice: "keep it simple." That means owning one joint account, so you needn't worry about accessing cash when a spouse dies.

"If there are individual bank accounts, then those accounts would be held up in probate, unless you place a transfer -on-death designation on these accounts," he says.

Winding down additional accounts may not be the most entertaining task on your to-do list. The upside, however, is that you'll have fewer to monitor in your golden years.

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