Should you have multiple bank accounts?

Chequing and savings accounts exist for different reasons, and most of us have one of each. After all, it just makes sense to separate your everyday spending money from the funds you’re storing away for a rainy day (or, in many cases, a much more specific financial goal).

But what if your lifestyle or plans necessitate more than two accounts? For some, operating multiple chequing or savings accounts allows them to stay better organized and on top of their money. 

While there is no hard and fast rule around how many accounts you can have at once (or what they can be used for), we’ll take a look at some general examples where this strategy may come in handy.

Reasons to open multiple bank accounts

While there are plenty of different reasons for people to open additional bank accounts, we’ve highlighted a few common ones below:

You’re teaching your child financial responsibility

Opening an additional joint chequing account with your child can be an excellent way to teach them financial literacy. They can learn how to make deposits and withdrawals as well as gain an understanding of how to properly budget. The best part, of course, is that you’ll have a window into the account to keep track of their spending and monitor their balance. Think of it as the financial equivalent of a learner’s car where you can both hit the brakes if necessary.

You’re a small business owner or entrepreneur

While there’s tons of benefits to being your own boss, one of the downsides is that the financial health of your business usually falls to you alone. Keeping a separate chequing account strictly for professional use can allow you to better manage and monitor payments, expenses, and taxes by separating them from your personal money. It also makes budgeting far easier as you adjust your spending from month to month.

You have a specific financial goal

Many people keep a savings account without much thought as to what they’re saving for - in general, it’s a great idea to have money stored away for emergencies. But what if you’re also saving up for something specific, like a car, a downpayment on a home or a vacation? You may want to keep that money separate from the emergency fund so you won’t lose track of how much you’ve got in that account (or how much you’ve saved for your goal). 

You want a specific account for recurring bills

If you’ve had trouble in the past making sure there’s enough money in your chequing account for recurring bill payments, you could consider keeping two: one for bills, and one for everyday spending. Using this system, you can ensure you’ll always have enough money in the “bills” account for necessities like rent/mortgage or hydro, and you can spend freely from your “everyday” account without worrying about eating into your budget for monthly expenses. It’s also a good idea to not have a debit card associated with your “bills” account, as this will eliminate any temptation to spend that money on anything else.

How to manage multiple accounts

While the idea of splitting your income into separate chequing or savings accounts sounds nice, you’ve also got to have a plan in place to divvy it up on payday. 

The easiest way to do this is to first look at how much your average paycheque is, then devise a budget to put x percent into each account. Once you know how much of your pay will be going where, you can set up automatic transfers on the account it lands in to send the money where it’s supposed to go. Automating this process will keep your spending at bay and ensure there won’t be any slip-ups. Not every bank offers this feature, however, so check with your financial institution to make sure it’s possible.

Pros and cons of multiple bank accounts

Pros

Higher interest rates

While keeping a savings accounts with a brick-and-mortar bank has the advantage of in-person service when required, online-only banks can offer superior interest rates that more traditional institutions can’t compete with. Having a separate savings account with each gives you the best of both worlds: you can keep your emergency fund in your old bank while saving up for that big purchase with a high-interest, online-only savings account that will get you to your goal much quicker.

Better organization

Being able to separate your funds into different accounts makes it easier to monitor the comings and goings of your money and avoid overspending or losing track of your savings. It also gives you greater peace of mind knowing that the money you’re spending on fun, frivolous things isn’t earmarked for anything else.

Signup bonuses

Many financial institutions offer attractive signup offers for new clients, and opening another chequing or savings account can get you access to these sweet deals. Whether it’s a promotional interest rate or a certain number of free transactions in the first few months, you could reap some benefits (at least in the short term) by opening extra accounts.

Cons

Fees

Unfortunately, one thing closely associated with bank accounts is monthly or yearly fees. These extra charges are quite common when opening chequing or savings accounts, so it would reason that the more you have, the more regular fees you’ll be paying. Not only that, but many banks want you to keep a minimum balance and will hit you with a fee if that requirement isn’t met. Depending on how much money you’re depositing and keeping, you could be subject to these sorts of charges if you’re spreading your income too thin across multiple accounts. 

High maintenance

While one of the biggest benefits to having multiple bank accounts is the ability to organize your finances, this really only works if you’re dedicated to staying on top of them. With more than two accounts to manage and monitor, you’ll be running the risk of losing track, and that can lead to lost savings, overdrafts, and unpaid bills.

The last word

Keeping multiple bank accounts isn’t for everyone - it takes discipline and dedication to make the most of it. That being said, if your financial goals can be improved with this method and you’re willing to put the work into setting it up and keeping track of your finances on a weekly basis, there are plenty of benefits. Do you keep multiple bank accounts, or have advice for those considering it? Let us know in the comments below.

Also read:

What to consider when choosing an online-only chequing account

Opening a joint savings account: what you should know