Banking

How many bank accounts should you have? An expert says this might be the wrong question to ask

  • Personal finance expert Lexa VanDamme said there isn’t a magic number of bank accounts everyone should have.
  • Instead of focusing on bank accounts, she uses a zero-based budget to give each dollar a purpose.
  • A zero-based budget can give you more flexibility than organizing your money by account.
  • Read more of Insider’s personal finance coverage here.

How many bank accounts should you have? Lexa VanDamme, the face behind The Avocado Toast Budget blog, said this might not be the right question to ask.

“Personally, I have an odd number of bank accounts — three personal checking, four personal savings, a business checking and savings, and a joint checking and savings,” VanDamme said. “And I get tons of panicked comments asking why I have so many and if everyone else needs that many, too. My short answer is: probably no, but it depends.”

VanDamme said you might not need to ask where you should park your money. Instead, ask yourself where your money is going when you spend it.

Personal finance isn’t one-size-fits-all

VanDamme said that if you really want an answer about how many bank accounts to have, she would recommend a high-yield savings account, a checking account for fixed expenses like rent, and a checking account for the rest of your spending.

But this isn’t necessarily the right call for everyone.

“Because what if you have a credit card you spend on?” she said. “Where do extra debt payments come into play with this method? Where do investing contributions come from? What about those awkward bills like our utility payment that is technically a necessary automatic bill, but the amount varies from month to month?”

Focusing on splitting your money between a certain number of bank accounts might be the right move for you. But VanDamme said creating a budget can be a more useful way to take control of your finances.

“The reason I can painlessly have seven different personal accounts without constantly feeling overwhelmed is because my budget tells me what to spend, not my bank accounts,” she said.

Zero-based budgeting may be a better system

VanDamme keeps track of her money by using a zero-based budgeting method. With zero-based budgeting, you assign every dollar a specific job, such as paying rent, going toward credit card debt, or buying new clothes.

With this budget, it doesn’t matter which bank account your money is sitting in, because you know what you’re doing with each dollar. You could have just one checking account if you wanted to.

“For me, this method makes the most sense because no matter what your situation, you can adjust it to make it work for you,” VanDamme said. “Zero-based budgets allow you to easily cover overspending in certain categories, and allow for credit card spending and extra debt payments without scrambling to figure out which account that money should come from.”

You may decide that opening several bank accounts is the easiest way to manage your money, but there isn’t one right answer to how many you should have. Instead, consider creating a budget that takes out the guesswork about how you’re spending your money.

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