How many Bank Accounts?

[happily single]

I need help in finding how many bank accounts my son needs to be effective and smart in his saving and spending. I have multiple bank accounts as I have multiple bills and a business, so I'm not really the best one as I have so many accounts my head spins sometimes (Ie: one bank account for house; one bank account for credit cards; one account for emergency fund; one account for basic savings)

His onlye xpenses are rent, which he will start paying to me in January and his car insurance, which comes out of his checking account.

My 19 yr old has a full-time job and a part-time job (big change from the spring when he refused to get any job). Right now he has a checking account and an emergency savings account. I am thinking he needs one more bank account. His full-time paycheck goes into the checking account and the part-time job goes into the emergency fund. I think the following would be a good start:

1. Checking account-used to pay rent, insurance and any other bills that he may acquire
2. Savings Account for emergency fund;
3. Savings account for fun money and future purchases ie: general car repairs, upgrades, etc.

Am I missing anything?

 

[disneydreamer1980]

My older kids just have a checking and a savings account and that seems to be working fine. I’m no financial guru or anything but I never thought about the need for multiple accounts for them. Their checks go into their checking accounts and a certain percentage gets automatically transferred into their savings.

 

[starry_solo]

Does he need the ability to divert funds for forced saving? If so, then three should be ok.

 

[amylevan]

I guess the answer is why and how much he needs to separate funds. I’ve only ever been a 2 bank account person (although we also have a brokerage account) but if he needs to separate things to help not touch it, then separate them.

Our Ally savings does have to ability to track “buckets” where you can separate the single account into different mini buckets/goals. It’s possible other banks offer something similar.

 

[NYCgrrl]

Just be sure to point out the financial wisdom of consolidating his savings accts as higher interest can be attained with larger dollar amts.

 

[cvjw]

My kids only have 2. Checking and savings. They never needed anything else.

 

[afan]

I'd do a hysa for the emergency fund for two reasons. It's got a higher interest rate than the savings he can get through the bank he's got his checking account. And it takes longer to transfer the money, probably don't have ATM access to it. This helps keep it for emergencies since you can't get immediate access to it. Normally don't need that quick of access for it. I transfer to mine from my bank and every so often I look at the balance. Not seeing the balance every time they login to their bank can be helpful if they don't have a saving mindset, less temptation to spend it.

I think it's helpful to have emergency separate from other savings goals.

 

[barkley]

i have multiple for specific purposes but as just a basic jump off point-

checking-(to pay bills and such)

reserve savings-this is a set amount each month for non regular expenses like car repairs/servicing/annual registration, annual subscriptions...(my oldest also includes 1/12th of renter's insurance premium so it's stuff that's not monthly but it does roll around and need to be paid)

emergency savings (keep a minimum amount in and/or have direct transfers from checking each month or payday towards the dollar goal you want to attain).

my younger also does a short term savings account that the money he's comfortable spending freely with goes into-in some cases he's saved for months for a new gaming computer or such, sometimes it's in and out monthly with purchases. it's his 'guilt free' savings that he does'nt worry about pulling from for wants vs. needs.

 

[lsutigers03]

I need help in finding how many bank accounts my son needs to be effective and smart in his saving and spending. I have multiple bank accounts as I have multiple bills and a business, so I'm not really the best one as I have so many accounts my head spins sometimes (Ie: one bank account for house; one bank account for credit cards; one account for emergency fund; one account for basic savings)

His onlye xpenses are rent, which he will start paying to me in January and his car insurance, which comes out of his checking account.

My 19 yr old has a full-time job and a part-time job (big change from the spring when he refused to get any job). Right now he has a checking account and an emergency savings account. I am thinking he needs one more bank account. His full-time paycheck goes into the checking account and the part-time job goes into the emergency fund. I think the following would be a good start:

1. Checking account-used to pay rent, insurance and any other bills that he may acquire
2. Savings Account for emergency fund;
3. Savings account for fun money and future purchases ie: general car repairs, upgrades, etc.

Am I missing anything?

Get him a checking account through your bank or whatever bank you prefer. Then I would get him a high yield savings account. I have accounts with Marcus and Wealthfront. My main accounts are with Wealthfront. Currently I have 5. Main savings, travel, my kids tuition, escrow, and a car downpayment, I like to keep my savings for larger expenses separate. So how many he should get would depend on how detailed you or he wants to be with his savings.

 

[tvguy]

First question I would ask, will there be monthly fees associated with each account? No reason to have multiple accounts if you are having to pay for them. Is he a student? Most banks have a College Student program that includes a checking account, a savings account and a credit card and this is usually without a monthly charge for any of them..
At this age I don't see any need for two savings accounts, he just has to keep in mind that his emergency money and long term savings are in the one account.
I have too many accounts as a result of bank mergers and family situations.
I have a checking account.
I have a second checking account that was a joint one I had with my mom so we could easily get money to each other as needed. When she passed I dropped her name and added my daughter who at the time was going to school in the U.K. and it allowed me to instantly get money to her as she needed. 10 years later we still have it as it is handy for when we need to transfer money to each other.
One savings that I have had since my dad opened it for me in 1964.
A second savings account was originally......... under another bank ownership........ a Money Market Checking account that paid higher interest, but that bank didn't offer that type of account, so they converted it to a savings account.
And I have a credit union account that is my emergency fund.

 

[gottalovepluto]

Yup, I would advise him to get 3. This would get him used to having that emergency account. 1 checking, 1 savings, 1 emergency.

Concur with @afan HYSA for the emergency fund. Also, later in life he might add a HYSA Savings. A separate bank holding the “big” savings account has indeed been psychologically good for me as it decreased my temptation to dip into it. (I keep a smaller savings account at the bank with my checking account for the increased yield on money waiting to pay larger recurring bills since I can transfer between those 2 accounts instantly.)

 

[happily single]

Yup, I would advise him to get 3. This would get him used to having that emergency account. 1 checking, 1 savings, 1 emergency.

Concur with @afan HYSA for the emergency fund. Also, later in life he might add a HYSA Savings. A separate bank holding the “big” savings account has indeed been psychologically good for me as it decreased my temptation to dip into it. (I keep a smaller savings account at the bank with my checking account for the increased yield on money waiting to pay larger recurring bills since I can transfer between those 2 accounts instantly.)

I agree. My "emergency fund" is at a bank that is about an hour away. I only have an ATM card for the account and that card is tucked away.

 

[firefly_ris]

We have a checking account (make sure it's free -- friend of mine was still paying Bank of America $12/month to have a checking account, total joke), HYSA account with Ally, and then I use their "Buckets" to earmark a certain portion as the "Emergency Fund" though fortunately I've yet to ever touch any of it. Some people benefit from keeping their emergency fund separate from their main savings account but I haven't needed to do that.

I would also consider opening a Roth IRA and maybe a brokerage to buy a couple index funds. Take advantage of the 2 jobs and get into the habit of investing early and that great compounding interest later on.

 

[loves to dive]

I would only have the checking and savings for him. He should be old enough if he has two jobs to understand that some of that savings needs to stay untouched. If not, good life lesson learned.

Personally, I have way too many accounts. I have my regular checking account that I've had since I was 21 years old (I'm 66 now). The bank has been bought and sold a number of times but I've kept the account just because it's easy and there are plenty branches around. I have another checking account at a small local bank in a town next to where I live. Originally, I had a savings account there because it was where my parents had an account and I had to open a checking to transfer funds in and out when I was taking care of my parents. I don't have an ATM card there, although I could get one. I keep the savings account there because it's about 20 miles from where I live so I have to think about it if I want to withdraw anything from savings. I can transfer between the savings and checking on line with that bank and both are interest bearing. I keep a very small amount in that checking account and set a limit for myself for the savings and if I get above that, I transfer to the money mark. I have a money market account with a non sticks and brick. I opened that when I was getting ready to retire to keep funds to use if I retired before I reached SS age. (Turns out I didn't need it since I start drawing SS next month and this month will be my last pay check). I linked the savings account to that for transfers. If I weren't so lazy, I'd close down the local checking account but I have my few automatic payments coming from that and do occasionally use the ATM.

 

[bighuskermav]

Personally, I think SoFi has an awesome setup. You can keep all of your money in your savings account (which earns 4.6% interest), pay out of your checking account, and turn on automatic overdraft protection. It will automatically pull from your savings account to cover the check/ACH, no fees/penalties.

They also provide free checks and a good network of ATMs. The app is really nice too. If I were to pick one bank in 2024 - I’d go for them.

That said - I am a churner that likes to chase signup bonuses. If you lookup doctor of credit - they keep a list of promotions where if you open an account and direct deposit a certain amount - you get a few hundred in interest. I probably made about $5,000 doing this last year. It’s not for the faint of heart and I wouldn’t recommend it for someone who is just starting to learn to manage their finances. But - it’s the closest thing to an “infinite money” glitch in traditional banking.

 

[barkley]

You can keep all of your money in your savings account (which earns 4.6% interest), pay out of your checking account, and turn on automatic overdraft protection. It will automatically pull from your savings account to cover the check/ACH, no fees/penalties.

a cautionary tale on overdraft protection-

oldest's wallet was stolen and in less than 45 minutes the debit card was used to drain the checking account at which time it began draining the associated savings via overdraft protection (and if a person has more than 1 savings account they need to see if that protection rolls over into each account b/c it can become a domino effect of draining each account one by one). fortunatly i had access online and while i was waiting for customer service (evening hours on a weekend) i was able to transfer the remaining savings into an unassociated account of my own but it took a good few weeks for the bank to research and verify the fraudulent activity in order to reimburse the checking and savings (and were only able to do that b/c the theft was via a debit card with a mastercard tie-in). we dropped overdraft protection after that-and reminded everyone to just be aware of how much is in their checking account to prevent the need for it.

 

[bholbert81]

Keep things simple. Checking for every day expense, then a savings account that pays interest (Fidelity, Schwab, Vanguard that is paying over 4.5% now) to harbor savings that can be accessed within days if needed. Not sure why you would need more than that as you can always spreadsheet the contents of the savings account into partitions like vacations, auto, major purchase (DVC hahaha), etc.

 

[Frwinkley]

I'm one of those people that has to have everything in separate buckets. I use Capital One, with one log in, but am able to open as many savings accounts as I'd like. I currently have one checking account and 12 separate savings accounts. Granted, I am much, much older than your son and this has evolved over the years to include things like car expenses, travel, etc.

 

[DisneyTexan]

Wow, everyone has their own way of managing things, that's for sure.

I'd suggest that your son keep it simple for now, and have one checking account and one savings account at the same institution. Every time he opens an account somewhere else, he will need to learn the rules for avoiding fees, transferring money, etc. He may want to open a third account somewhere else when there is a significant financial benefit (maybe $20/month).

 

[bighuskermav]

a cautionary tale on overdraft protection-

oldest's wallet was stolen and in less than 45 minutes the debit card was used to drain the checking account at which time it began draining the associated savings via overdraft protection (and if a person has more than 1 savings account they need to see if that protection rolls over into each account b/c it can become a domino effect of draining each account one by one). fortunatly i had access online and while i was waiting for customer service (evening hours on a weekend) i was able to transfer the remaining savings into an unassociated account of my own but it took a good few weeks for the bank to research and verify the fraudulent activity in order to reimburse the checking and savings (and were only able to do that b/c the theft was via a debit card with a mastercard tie-in). we dropped overdraft protection after that-and reminded everyone to just be aware of how much is in their checking account to prevent the need for it.

That’s a fair point. I prevent this by freezing my debit card (which SoFi lets you do from the app). It’s unfortunate that this also disables the ATM functionality, but I tend to not pull cash from this account anyway.

It’s not that I can’t keep track of how much needs to be in my checking account…it’s just that I want to keep funds in the high-interest account for as long as possible. I refuse to use debit cards at all (except as ATM cards).