The ideal number of bank accounts
Most consumers have a checking account to their name. For the vast majority, a bank account simplifies daily transactions, helps keep track of spending and can transfer money to friends or between other accounts. In fact, a relatively low number of U.S. consumers are without a bank, according to a 2013 survey from the Federal Deposit Insurance Corporation. Only 7.7 percent of the population were reported as unbanked.
The rest of population likely has many accounts to their name. This raises an interesting question over just how many checking and credit services someone needs. The answer to that varies, according to Time Money writer Taylor Tepper. Interestingly enough, the number of accounts you should have will vary with age.
For the recent graduate
Recent college graduates have two distinctions: they're likely a millennial and are new to the work force. As such, a recent hiree doesn't have much capital or income to his or her name. If you find yourself in this grouping, there is no need to have anything more than one checking account and one savings account.
Your checking account should handle all daily usage, which may include daily transactions and paying monthly rent and utilities. This account should also handle your weekly or bi-weekly income. Tepper also recommended young workers choose an account with little or no fees.
Millennials should set up a high yielding savings account for one purpose: to create an emergency fund. The purpose of this account should be to help you get through unexpected predicaments. Ideally, you'll have about six months of expenses saved in this account, which will accumulate interest. Unexpected emergencies may include a doctor's visit, unemployment or car repairs.
For the family
As you get older, you'll likely start to accumulate more wealth through raises and investments. The more money you have, the harder it is to manage everything with one account. Along with your spouse or partner, you'll want to look into creating multiple joint savings accounts or certificates of deposit.
These savings accounts should be created with specific goals in mind, such as saving for a housing down payment or your children's future college tuition. Married couples should reach an agreement on savings account and pool their resources together, Richard Barrington, financial expert at Money Rates, told Time Money.
This changes with checking accounts. Both partners should have an individual account for daily transactions.
For the retiree
At this point in your life, your children have finished college and you've finished paying off a mortgage and the car. As a retired individual, your monthly income is likely coming from a 401k, pension or individual retirement account. Your working years were all about growth, and now, during the relaxation years, it's all about downsizing.
You'll still want a joint savings account, according to CIC Wealth CEO Ryan Wibberley. Again, this account should have enough for six months of essential expenses. However, both the savings and checking accounts should be designated as transfer-on-death. In the event you or your spouse passes, the accounts will be handed over to the beneficiary without any delay. Accounts may be placed in probate otherwise.
After all, you're retired. You shouldn't have to spend these years worrying about all your financial accounts.
These three groups are a general overview of various points you'll find yourself in life. As your jobs and personal goals change, so do your finances. Fresh college graduates don't have to worry too much about wealth accumulation, but once they start a family, money management and savings are key. What works for one individual or couple may differ for another.
The only two constants are a checking and savings account.
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