How many bank accounts should I have? 4 reasons to have multiple checking accounts

If you've heard your friends and family talk about having multiple bank accounts, you may be wondering, "How many bank accounts should I have?" Most people have at least one checking and one savings account as they're just starting out.

But as your life unfolds, your financial goals and responsibilities might change. Adding a bank account or two can help you be ready for whatever life throws at you. With multiple bank accounts, you can dedicate specific ones to certain goals or expenses and take control of your spending.

Read on to discover four reasons why having multiple bank accounts may be exactly what you need.

With direct deposits coming in and automatic payments going out, managing your money can feel overwhelming. A smart way to keep it simple is with a percentage-based budget like the 50/30/20 rule. The idea is to divide your income into three categories, spending 50% on needs, 30% on wants and 20% on savings.

If you've ever made a mortgage or rent payment without realizing your credit card payment was also hitting your account that day, you may benefit from keeping your needs and wants in separate checking accounts. This way, you can confidently swipe for the things you want without worrying about cutting into an important bill.

Take a look at our 50/30/20 calculator to see what this budgeting strategy would look like for you. When using multiple checking accounts for budgeting, each account should have its own specific purpose. Designate one account for paying bills only and avoid accessing it for everyday spending. Another account would be your everyday spending account for items like groceries, gas and impulse purchases. This way, you can better keep track of both accounts without worrying if buying groceries will make your rent check bounce. It could also help you to rely on a credit card less as you're more closely managing your finances.

As an entrepreneur, having separate accounts for your small business can make your bookkeeping life a lot easier. It can help you track your business-related expenses like gas for your ride-sharing hustle or shipping costs for your online store. Once tax or audit time rolls around, you'll be glad everything is in its own place.

Just like the name suggests, this is a break-only-in-case-of-emergency account. Unlike your regular checking account, an emergency fund is built to provide a financial cushion in case you lose your job or are unable to work. Ideally, you should be able to pay your bills and financial obligations for three to six months from this fund.

If you find yourself transferring money out of your checking account more than once or twice a month, you may need a separate account for your emergency fund. Keeping emergency funds separate from the account you use for daily spending — and having a separate debit or ATM card for the account — can help ensure that the money will be there and readily accessible when you need it most.

Once you're ready to open another account, you'll want to think about which type will best help you reach your financial goals. You could simply open another basic checking account, but you may be missing out on benefits that other account types provide. Here are a few options to consider:

• Interest checking. Interest checking accounts pay interest while allowing you easy access to your money. Since you typically need a higher account balance to earn interest, you may want to reserve an interest checking account for less frequent expenses.
• Joint checking. A joint checking account lets you share bills and expenses with your partner while keeping a separate checking account in your name only. Joint checking may not earn interest, but it can simplify your shared expenses and reduce money fights.

Having multiple checking accounts could also mean more maintenance — and more fees — from the bank if you fall below the minimum balance requirements or inactivity thresholds. Be sure to stay on top of your finances to avoid paying any unnecessary fees or losing out on accruing interest.

Planning to take a family vacation? Upgrade your home or yard? Help your kids pay for college expenses down the road? Instead of keeping the money you've accumulated toward these financial goals in one account, you could open a separate checking account for each one. Not only will having separate accounts make it easier to quickly see how close you are to your goal, but you'll also be able to access the funds when you need them without worrying about taking money away from your other goals.

There's no hard and fast rule about how many checking accounts any one person should have. The number and type of checking accounts that work for you will depend on many factors, including your financial goals, spending habits and comfort level with monitoring and managing multiple accounts.

Beyond your checking account, you may want additional bank accounts to help you reach your short-, medium- and long-term goals. The number of accounts you have depends on your savings goals.

• Savings account. Use a savings account to be ready for life's surprises, such as a busted washing machine or a surprise trip to the mechanic. A savings account is also a good place to build and stash your emergency fund.
• Money market account. Money market accounts are similar to savings accounts but typically earn higher interest rates and require higher minimum balances. Most also come with checks or a debit card, making them like a hybrid savings-checking account. Since you typically have to put more into a money market account to get a higher interest rate, consider using one for longer-term goals, such as a down payment on a house or a dream vacation.
• Certificates of deposit (CDs). CDs often pay higher interest rates than savings accounts, but you need to leave your money in the account for a set term, such as six months, one year, two years and so on. Withdrawing your money before the term ends means you give up some of the interest. Opening a CD can be a good option if you want the security of a savings account but don't expect to need your money for some time.

Whether you open one or several checking accounts, money market accounts or CDs, the right number of accounts is based entirely on your financial goals and needs. Think of what you want your money to do and then choose which accounts can do the heavy lifting for you.

Learn more about checking account options at Citizens, and start a relationship with a bank you can trust.