So you’ve started your journey to financial freedom. You’ve been listening to podcasts and reading blogs like this one and are ready to dive in. But you start to ask yourself “how many bank accounts should I have?” One doesn’t seem nearly enough (with all the things you need to pay for). But you also don’t want to overdo it (too many bank accounts could result in unnecessary overage fees).
If this sounds like you, don’t worry. I was in the exact same spot. “What in the world are all these terms??? Debit? Credit? Interest rates?” Sometimes it was so confusing that I would want to give up altogether before even getting started. But, I assure you that spending the time to figure out the nuances of multiple bank accounts and opening up the right number will significantly help you achieve your financial goals.
With that being said, let’s dive in and find out exactly how many bank accounts you should own, and why you should have them.
Why Open Multiple Bank Accounts?
At this point in time, you might be asking the obvious question. “Why do I need to own more than 1 bank account?” After all, technically, you could just have 1 checking account in which you funnel everything.
The answer comes in three:
- Goal tracking
Having multiple bank accounts will help keep you organized. If you only have a singular bank account, you also only have a singular account balance. What this means is that all your expenses, all your income streams, all your transfers will affect the same value.
This was what I did and personally, I couldn’t handle the chaos. I consider myself a very organized person, yet all the spreadsheets and budgeting in the world couldn’t keep my bank accounts squared. I ended up not knowing where my money was leaking out to, and (even worse) not knowing where my money was coming from.
Having multiple bank accounts solved this issue for me. With the separate accounts, I could now clearly see where I was spending money and where I was saving/investing/making money.
In a similar vein, having multiple bank accounts will help you track your goals better. Want to save money for a down payment on a house? How do you know how well you’re progressing if the same account you use for saving is also the same one that you pay groceries with?
Breaking out your money goals into various buckets and aligning your bank accounts with them will give you a clearer picture of where you stand. For example, some of my financial goals are:
- Paying off my student loans
- Saving up for a downpayment for a house in 5-7 years
- Investing consistently into the stock market
Likewise, I have a savings plan and savings-account for each one:
- A regular savings account for my student loans
- A high interest yield savings account for my (future) downpayment
- And I regularly contribute to an online brokerage through a special investing account
I know exactly where I’m at with each of my goals, but it wouldn’t be possible without separate bank accounts.
Arguably the best reason why you should have multiple bank accounts is automation. One of the most powerful ways to build wealth is to pay yourself first. What this means is taking a chunk of your paycheck and dumping it into your savings/investment before you do anything else. Automating your finances makes it infinitely easier.
When you automate your transfers, you make investing an unconscious process. Before I automated my finances, it would take me like 5 steps to invest in a stock. Now, it’s done automatically before I even realize I invested any money.
None of this is possible without multiple bank accounts. Having multiple accounts split between investing, saving, and day-to-day expenses makes automation way easier and in turn makes your financial goals that much closer.
How Many Bank Accounts Should I Have
When you go to a bank they’ll undoubtedly throw all of their stuff at you. You might hear terms like IRA, FDIC, and CDS, but don’t worry about those. At the end of the day, there are really only 5 bank accounts that you should have. Of course, you can split it up even more within each one, but at a high level, 5 should do.
A Checking Account
The most basic bank account you should have is a no-fee or low-fee checking account. This is where you’ll do most of your day-to-day finances. Nowadays, there are many places to look, so try your hardest to go for a no-fee bank account.
What you’ll do here:
- Deposit your paycheck
- Pay for your bills (which you don’t pay for with your credit card)
- Spend on one time things
If you only ever open one bank account, a checking account is the one to go with. It will cover all the basic needs without draining any money from your account balance.
A Credit Card Account
Now, you may be wondering “don’t all those personal finance gurus say to AVOID credit cards?” Yes and no. Most personal finance people will tell you to avoid credit card DEBT. This piece of advice taken on its own is true, of course. Credit card debt is some of the worst in the whole world. With interest rates upwards of 28%, you don’t want to fall prey. That being said, the easiest way to do that is to not get a credit card at all. And that would be a mistake.
A credit card has quite a few advantages:
- You can track all of your expenditures really easily
- If someone steals your card you can freeze the account effortlessly
- You can build your credit score
The best reason to use a credit card is so that you can build your credit score. Make purchases regularly with your card but be sure to pay it off in FULL every month. Do this and your credit score should be near perfect within a few years.
This is the place where you will store away money in case of a rainy day. It’s different from your regular savings account because you should (ideally) not touch it much.
Because of this attribute, it’s recommended that you get a high-yield savings account for your emergency fund. This way, your money won’t just be sitting there and will be earning you higher interest rates than it would in a regular savings account.
It’s ok for you to just have one emergency fund, but I personally have two. One for short-term emergencies and one for really big disasters. The short-term one is if my car ever needs fixing, or if something ever breaks in my house. These are typically big one-time expenses, but not huge. For this, I keep around $1000-$2000 stored away (this will differ person by person).
The long-term emergency fund is one for if you ever lose your job or your car gets absolutely totalled or you develop a chronic disease that needs a lot of funding. For that one, it’s recommended you keep around 6-12 months worth of your income stored away. This way, if you lose your job, you can still cover your living expenses for a long enough time for you to find a new one.
Retirement Savings / Investing Account
If you’re like most people, you want the option to be work-free someday. To achieve that, you’ll need to build up a nest egg for you to retire on.
Everyone’s retirement number will be different. But regardless, you’ll need to start growing your savings if you’re ever to reach it. Having a separate bank account for your retirement investing activities is a great way to keep organized. On top of that, this is where you can apply automation.
Every month, tell your employer to wire a percentage of your paycheque directly to this bank account. Then, set up a monthly auto-transfer directly into your brokerage account. Congrats! You have successfully set up everything you need to pay yourself first and build immense long-term wealth.
Major Purchase Savings Account
The final bank account you definitely need is a major purchase savings account. This is the bank account where you want to put the money you don’t need for a while but also don’t want to risk too much.
If you’re thinking of saving up for a downpayment for a house or to buy a car, this is the account for you. For most people a high interest savings account will do, but there are some other options you can explore:
- CDs (certificate of deposits)
- GICs (guaranteed investment certificates)
- Money market accounts
Any of these can work as they are all relatively low-risk ways to grow your money (albeit slowly).
So What is the Magic Number?
The exact number of bank accounts will differ from person to person, but you should have five at a minimum (three of them will be various forms of a savings account).
The 5 bank accounts you should have are:
- A chequing account for your day to day purchases and paychecks
- A credit card account to build your credit and funnel your stable expenses through
- An emergency fund for rainy days and lost jobs
- A retirement savings/investing account
- A major purchase savings account
Start Opening Up Those Accounts!
Organizing your financial life starts with separating out your finances. The best way to do that is by opening up multiple bank accounts.
In this post you’ve learned of the 5 must-have bank accounts and why each one is important. It’s on you now to open them up and start building towards your own financial goals.
Thanks for reading through this post revealing How Many Bank Accounts Should I Have and thank you for following along! If you’re a Canadian Student, check out the Ultimate Canadian Student’s Guide to Personal Finance! If you want to be financially free sooner, check out this page here! To learn more about me, head over to this link here. If you want to get exclusive updates and tips, drop your email in the “get updates” box (might have to scroll up a bit.) Let me know your thoughts and suggestions in the comments!
Jeff is a Harvard 2025 student passionate about making smart financial decisions both in school and in the workplace so that he can spend more time doing what he loves (like playing golf, spending time with family, and travelling). He has experience working in the financial industry and enjoys sharing all things personal finance, academic, and golf-related. Outside of blogging, he loves to cook, read, and golf in his spare time.