What Bank Accounts Should I Have?


Having one bank account seems to make sense --- only one account number to remember, one ATM card to carry, one check book. Simple.

However, having specific accounts for different purposes has its advantages. It allows you to budget more effectively and keep track of major financial goals.

So how many accounts do you need?

There are at least 3 type of accounts you may want to consider.

The first account is for daily use. This account is with a bank that is easiest for you to access (for example a bank that has the most ATMs near your home or office). The money in this account is for daily expenses --- rent, groceries, transport, etc. This is also where you pay your credit card bills from.

Right after you receive your salary, put just enough money in this account for 1 month expenses (If you don’t know how much is your monthly expenses you need to track it now).

You may also have your salary transferred to this account. If this is the case, then transfer out what you do not need for daily expenses into separate accounts (read on to find out what other accounts you need).

The second account is for your emergency fund. You should aim for an emergency fund that is 6 times your monthly expenses.

Related article: What should be in your emergency fund?

A separate account for this is necessary, so that you are not tempted to use this for non-emergency expenses. Therefore, this account should be located in bank that is harder to access (maybe it has less ATMs in your area).

Leaving the ATM card for this account at home, under lock and key, is also advisable, just in case you pass by a gadget store, have palpitations and conclude (or rationalize) that it is an emergency situation.

And the third is an investment account. The rest of your cash should ideally be in this account., especially if you have no plans to use the funds in the near future (less than 1 year).

You can have one or more investment accounts depending on your goals and lifestage.

The simplest way is to invest any excess cash into mutual fund account. One can get higher returns than a savings or even time deposit account. And as you grow your money faster, the more quickly you are able to get to your goals, whether that’s a vacation or buying your dream home.

If you just started working, you may not have enough funds to open more than one account and maintain the minimum balance. No worries!

Start with one account and then in a few months, open another one (we suggest the emergency fund account), and after a few months, an investment account.

Remember that while “out of sight, out of mind” may be bad for your relationships, it works very well for your financial health!

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