We live in a world where it seems that you can never have too much of one thing. But is it possible to have too many bank accounts?
That’s a question with multiple answers, depending on your individual circumstances. Do you have several long- and short-term goals? What stage of life are you in? Are you good at multi-tasking/keeping track of numerous accounts?
Let’s delve a little deeper to see if multiple accounts are a good fit for you.
Life is full of goals, and financial goals are among them. Long-term goals might include saving for a new house or a car, or setting aside money on a regular basis for a retirement fund. Shorter objectives might be saving for a luxury vacation or home renovations.
If you have multiple goals and are finding it difficult to keep track of how much you’ve saved toward each one, then having a dedicated savings account for each goal could be a good solution. Another option is to set up one account for long-term goals and another for those you hope to achieve in the near future.
You can also approach the “how many bank accounts” question from a life-stage perspective. For example, most young people may find that they only need two accounts – a checking and a savings account. The financial lives of college students and young twenty-somethings can be fairly uncomplicated, so having multiple checking and savings accounts could create a lot of unnecessary work and confusion.
Those in the mid-stages of their lives may have a few more things on their plate. Married couples with kids could be eyeing an account for college tuition and related expenses. Or they may have plans to purchase their first home, or move into a larger home. And, of course, saving for retirement should be part of the overall picture as well.
Speaking of retirement, that’s another major stage in life that can bring about a lot of financial change. For many, it’s a time when there’s less to deal with (the house is likely paid off, the kids are out of college), so fewer bank accounts may be in order.
No matter what your situation, don’t lose sight of the fact that the more accounts you have, the more you have to keep tabs on. This is especially true if you have several accounts at different financial institutions. You’ll want to ensure you’re monitoring every account you have on a regular basis for any errors, or suspected fraudulent activity.
While financial experts say that for the most part, having multiple bank accounts is not likely to impact your credit score, there are a few scenarios where your credit history could be affected. For example, some financial institutions may pull your credit report when you first open a new account. If you try to open several new accounts at different banks in a short period of time, it could result in negative short-term damage to your credit report.
Also, if an account reaches a negative balance and stays there over a long period, the bank could refer the delinquency to a collections agency for retrieval of the amount owed. The agency, in turn, may report this delinquency to the three credit bureaus, causing a negative blow to your credit score.
However, if you can steer clear of these situations and you’re confident in your ability to keep tabs on your various accounts, having multiple bank accounts for different purposes could be an effective way to help you reach your savings goals.