How Many Financial Accounts Should You Have?

Financial accounts are a modern day necessity.  Most people have an account at a bank, if not multiple banks.  At that bank they are likely to have a checking account, savings account, and even a CD.  In addition, it is quite common for people to have multiple active credit card and debit card accounts.  Unfortunately, each of these accounts adds a layer of complexity. One of my current financial goals is to simplify my finances – hence the need for a simple budget and fewer financial accounts.  In this quest to simplify finances I have found that there are many reasons why multiple accounts are a bad idea.

Why Are Multiple Accounts A Bad Idea?

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  • The more accounts you have, the more time you will need to commit to accounting.
  • The more accounts you have, the more likely you are to make an accounting error that will cost you.
  • The more accounts you have, the more likely you are to divide your financial focus.
  • The more accounts you have, the more likely you are to stop monitoring your statements.
  • The more accounts you have, the harder it is to protect yourself against fraud or clean up after a fraud.
  • The more accounts you have, the harder it is to get a big picture look at your financial standing.
  • The more accounts you have, the more likely you are to are to be financially distracted from the things that really matter in life.

    Nevertheless, There Are So Many Good Accounts To Have:

    I have been encountering a lot off different account ideas lately:

    Frugal Dad suggests we have an Opportunity Fund – great idea, I thought.

    Fivecentnickel suggests we get an account for extended warrantees – hmm, that sounds good.

    Helen Hunt advises you open a contingency fund – yes, I agree.

    Most folks recommend an account for an emergency fund – absolutely essential.

    Of course it is important to have a savings account to help you get the most interest on your money.  You should also consider a Money Market Account.  Don’t forget a checking account is important.  Then you need an account at the local back

    These accounts (all individually great ideas) all add up to create a complex financial system that is more likely to fail than succeed.

    What Is The Solution To Feeling Overwhelmed By Multiple Accounts?

    1. Set up one fund.  Call it ‘The Fund’.  ‘The Fund’ is one fund that holds all your miscellaneous subaccounts. You can just keep track of the amounts on paper instead of opening completely separate accounts.  Basically any time you need money to keep somewhere, you dump it in THE FUND and write the amount on a piece of paper.  Your fund might have $15,000 and you know $10,000 is for retirement, $2,000 for tax payments, $2,000 for vacations, and $1,000 for opportunities.  While there is only one physical account, there are multiple amounts in each one.
    2. After you get ‘The Fund’ money transferred into one account, cancel the rest.
    3. Start using just one card or switch to cash. Making four credit card payments every month is a hassle and could cause accounting mistakes.  Choose the simpler pathway.  Yes, you might miss out on 5% cash back on this or that, but overall you are in better control of your money if you have just one account.
    4. Decide if you really need both a savings account and a money market account. Interestingly, right now savings accounts are paying better interest than money market accounts.  Typically, the opposite is true.  However, you need to determine if in your case the interest difference really justifies managing another account.  At this point in our lives we have said no, so we only have a savings account and not a money market account.

    It doesn’t take long to get overwhelmed by all the things you need to do to organize your finances.  But, financial organization is a habit of financially fit individuals.  Having one account might mean you miss out on some customized opportunities, but in the long run simplifying is much better.

    How many bank accounts do you have?  When it comes to financial accounts, what is better – more or less?

  • Last Edited: 26th February 2011

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      Share Your Thoughts:

    1. thisisbeth says

      My problem is that even though I keep track of things in Excel and on paper, I need all the seperate accounts to see what money is available for what–it’s the way my mind is wired. I have some accounts combined–things that are too small to warrant their own account, but large enough that I want them budgeted/saved for all year.

      That being said, I’m thinking about dropping a few of my banks and making them ING sub-accounts, for simplicity’s sake.

    2. says

      This is SO my family! I wish we would just have 1 Junk Account for all the trash money that is being dumped for rainy days – but no, little account for little dumps for little days. I need to pray about combining, let God do the dirty work :o) At least I will be able to post this inconspicuously on the fridge and hope its read!

    3. says

      Great Article. I recently did this, as it was proving too time consuming to have as many accounts as I had. I had 2 checking accounts at different banks, 2 savings accounts at different banks, and 3 credit cards. I had planned on getting rid of a few of them, but the bank was purchased by another bank, complicating the process, but it was still worthwhile in the end.
      I now have 1 checking account and 2 savings accounts. It makes my life much easier.

    4. says

      I’ll admit it: I’m a fan of having a bunch of accounts. However, most of these are with ING and set up for specific budget or saving categories. While I could write these down on paper, it is just easier for me to separate my finances as much as possible. It is sort of like tricking myself into believing that I only have that much money available. While the number of accounts I have might be too many for most, it works for me. Thanks for the article!
      Branden @ FaithFitnessFinance´s last post ..Back and Biceps

    5. says

      I’m embarrassed to say how many accounts I have out there. I get bored with one bank and open an account with another bank. I always plan to close the old account but I never get around to it.

      There’s also the accounts I opened to take advantage of account bonuses or rewards. Again, meant to close them but never did.

      One of these days, I will get all those accounts closed and just keep everything to a bare minimum.

    6. says

      For brokerage accounts, not much choice. Joint, his IRA, her IRA, his Bene IRA, Kid’s College Trust.
      For the checking, we have his/hers/ours. We don’t want to have to tell each other every time we write a check, so working out of the same checking account never seemed to make sense. On payday, we keep what we need, the rest goes to the joint account.
      JoeTaxpayer´s last post ..The Dow 10,000 means nothing

    7. says

      I think you’ve highlighted a common area of challenge. I had this problem in the past, but found it was solved by using Mvelopes Personal. There is other personal finance software that may do the same. Anyway, Mvelopes allows you to create envelopes, so you can have one checking account and savings account. The electronic envelopes represent the different categories for each account. So, you may have $15000 in savings, but it can easily be divided by emergency savings, refrigerator savings, vacations savings, etc. envelopes.
      Jason @ One Money Design´s last post ..Teaching Kids About Money

    8. says

      @thisisbeth. Sub-accounts at ING are a GREAT idea. If you need multiple accounts keeping them at one institution makes a lot of bookkeeping sense.

      @Singe Guy Money. That sounds a lot like me in a former life. My wife encouraged me to do some spring cleaning and I’m loving the simplicity.

      Jason @ Redeeming Riches. Thanks for mentioning passwords. People get lazy and usually just use the same one for all accounts – bad idea.

      Jason @ One Money Design. Mvelopes sounds like a great program for keeping track of everything. Thanks for mentioning it.

    9. says

      Hi Craig,
      Good article, but let me offer a suggestion. At Slap My Wallet I recently wrote a post about using two checking accounts for budgeting. One for bills and the other for spending money. We pay our bills twice a month using our bills checking account. At that time we transfer spending money into our second account. The only accounting we have to do on a daily basis is keep an eye on our balance in the spending account and behave accordingly. This system has worked great for us for the last three years. We’ve yet to miss a bill or spend more than we had. I’d encourage you to give it consideration.

      Also setting up a master savings account called ‘the Fund’ is a great idea. I give the advice to establish this type of account at a bank that is different from your regular bank. Additionally don’t accept a debit card on this account. Point is most people cannot resist the temptation to spend this money using their ATM card when they are running low. It’s a lot easier to save money when you don’t have access to it.
      Best, Brian

    10. says

      Thanks for writing this. I have been trying to figure out which direction we will go. We have two banks we do business with and 5 accounts between them. Then two CCs. It is all too much and while I like the idea of automatically withdrawing from the main account to a special savings account, it has proved to be much more work then I thought all that automation would turn into. In the end, a little brain power is better, faster, safer then trying to make everything “Fail Proof” with automation and lots of accounts.
      Sid Burgess´s last post ..Cures for Civic Apathy, An Official’s Perspective

    11. Josh says

      @craig, @Jason@OneMoneyDesign – Hey guys, I seen you both mentioned Mvelopes as an alternative to some of the other budgeting software that exists out there. I too use mvelopes and have been telling all my friends about how much easier it has made those “financial talks” between my wife and I.

      Also, they are running a 10% off special right now, when you sign up you put in the coupon code “10off” and it will take 10% off your first billing subscription.

      I received the code in email, I am pretty sure it is good through February of 2011.

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