• Edited By
    Savannah Hanson
    Savannah Hanson, financial editor for Annuity.org

    Savannah Hanson

    Senior Financial Editor

    Savannah Hanson is an accomplished writer, editor and content marketer. She joined Annuity.org as a financial editor in 2021 and uses her passion for educating readers on complex topics to guide visitors toward the path of financial literacy.

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  • Updated: January 30, 2023
  • 5 min read time
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Banks are a secure place to store your money and earn returns through certificates of deposit (CDs) and other savings accounts. Most Americans have a checking account for their direct deposit, but storing your cash across multiple accounts and banks may offer the best bang for your buck.

Just how many bank accounts should you have? Experts recommend five different accounts, but you can adjust this strategy based on your personal financial goals.

  1. Checking account for bills
  2. Checking account for spending
  3. Savings account for emergencies
  4. Savings account for short-term savings
  5. Savings account for long-term savings

The High-Five Banking Method for Budgets

Five bank accounts is the magic number for many, and this strategy is called the high-five banking method. This setup automatically breaks a person’s budget down by spending and saving needs among two checking and three savings accounts.

Automated deposits and bill payments make this even easier, so you can pre-plan your budget and set your accounts to divide your paycheck, avoiding impulse spending or costly late fees.

High Five Banking

How Many Checking Accounts Should I Have?

The high-five method recommends maintaining two checking accounts. One account covers your routine payments, including bills and grocery spending, while the second account holds your spending budget for eating out, entertainment and other wants.

Checking vs. Savings Accounts

Create a detailed budget considering your past months’ expenses and future spending goals. Then, you can deposit exactly how much you need to cover your bills into your first checking account.

This also allows you to determine how much you want to spend for unbudgeted purchases, like a new purse or night out. This reduces your opportunities to impulse spend so you can focus on savings.

Pro Tip:
Only bring the debit card connected to your spending money account when you go out to avoid overspending.

How Many Savings Accounts Should I Have?

Managing three separate savings accounts allows account holders to visualize the performance of each savings goal. Savers can split their investments across these primary goals:

Emergency fund:
six to nine months' worth of income
Short-term goals:
paying for a vacation or a new car
Long-term goals:
saving for retirement

Emergency Savings Accounts

Emergency savings can cover surprise costs without impacting your budget. This can be as small as renting a car while your daily ride is at the mechanic, or as large as paying your bills if you get sick and leave work.

An emergency savings should cover at least six months of your income, but nine months is ideal if you can make it work. This account should be easy to access within a day’s notice, so a high-yield savings account is a good way to go.

Pro Tip:
You don’t have to keep all of your accounts at the same banking institution, so shop around for the best rate. This can pad your nest egg and help you reach the six-month income goal quicker.

Short-Term Savings Accounts

Short-term savings goals include anything you’re planning to buy in the next three years or so. This can look like a house down payment or a family cruise, and you can save for multiple goals at once.

Short-term savings are best kept in low- to moderate-risk investments, so you can still earn returns without worrying about losing your investment if the markets go south.

Bank savings accounts are good if you’ll need to access your funds in the next few months. You can also invest in stocks or mutual funds for greater growth, but you won’t be able to cash out immediately when you’ve reached your goal.

Long-Term Savings Accounts

Long-term savings accounts can help you save for purchases three or more years down the line. This may include saving for your child’s education or planning to fund your own business startup.

Long-term investments can weather market fluctuations better than short-term savings because the account has time to recover from downturns before you need the money.

The biggest benefit of investing money is that it allows you to grow your wealth more quickly and often outpaces inflation. Money in traditional savings accounts is safe and still earns some interest, but you’re likely losing wealth considering yearly cost of living increases.

Top Bank Accounts To Consider

Each type of bank account comes with different benefits and fees.

For example, you can take money out of your checking account at any time with mobile banking, debit cards and checks. If you’ve purchased a CD, you’ll need to contact the bank to access your money and may be charged additional fees.

When comparing banks and accounts, consider:
  • Accessibility
  • Fees
  • Interest Rates
How Interest Rates Impact Savings

The type of account that works best for you depends on your financial goals. Checking accounts are almost always ideal for spending money, but some banks have minimum deposit and balance restrictions, and may charge expensive fees if these aren’t met.

Savings and investment accounts are even more varied as you compare fees and returns. Here’s a breakdown of popular savings options provided by banks and credit unions.

Savings account:
the easiest to access with an average interest rate of 0.06%
Money market:
includes some benefits of a checking account as a savings vehicle and offers a 0.08% average interest rate
holds the investment for one month to five years and offers an interest rate range of 0.03% to 0.26%, depending on your term
High-yield savings:
similar accessibility to traditional savings accounts but with a much higher interest rate, around 0.5%

Setting spending and saving goals is a great way to manage your financial wellness and stick to your budget. Maintaining multiple bank accounts and automating your baking across the accounts secures your assets and makes budgeting a breeze.

Once you’ve set your goals, learn more about stocks and other investments to build your wealth and secure your financial future.

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Last Modified: January 30, 2023