Deciding whether you want your savings and checking accounts at the same bank or different banks isn't a cut-and-dried decision to make. Keeping your accounts together can bring greater simplicity, but keeping them separate can increase your financial security. Choosing which option is right for you boils down to how much money you're working with and your personal preference.
One Bank Increases Simplicity
If the idea of managing your money seems overwhelming and you want to keep things as simple as possible, then you'll likely prefer to keep your savings and checking accounts at the same bank. People who keep accounts at separate banks are likely to spend more money, partially because it's easy to lose track of just how much you have when you're dealing with multiple accounts. In addition, keeping your accounts at the same bank can make it easier to save money.
Northwestern Mutual points out that setting up automatic transfers from your checking to your savings account is a simpler process when you're just dealing with one login. They also state that using one bank gives you a quick snapshot of your finances, as you only need to log in to a single system to see all of your accounts.
Separate Banks Grant Greater Security
If you're worried about how secure your money is, especially in the face of possible fraud or identity theft, then you might want to keep your checking and savings accounts at different banks. Bankrate reports that the Federal Deposit Insurance Corp. insures up to $250,000 per bank account.
So although most young adults likely won't run into issues with having too much money in their accounts, you might have issues with temporarily losing access to your accounts if your identity is stolen. These issues can typically be resolved quickly, but having an emergency savings account at a separate bank can ensure that you don't run into unexpected problems.
Chasing a Higher Interest Rate
Keeping your savings and checking accounts at separate banks allows you to seek the best deals for each type of account. Just because a particular bank offers a high interest rate on its savings accounts doesn't mean it offers good deals on its checking accounts. And sometimes, banks managed solely online offer the best savings accounts rates because they don't have as many overhead costs to cover.
But the downside of chasing a higher interest rate could be that you have to deal with more banking fees. Some banks offer discounts if you keep your savings and checking accounts at the same place.
Read More: What Are High Interest Rates?
Avoiding Overdraft Fees
Overdraft fees can be a big issue, especially for young adults who are just starting out and people who can lose track of how much money they have in their checking accounts. If you choose to keep your savings and checking accounts at the same bank, you can protect yourself from high fees if you accidentally write a check for more than you have in your account. Most banks allow you to set up automatic transfers from your savings account in the event of an overdraft.
Read More: How to Overdraft Your Bank Account
Meeting Important Goals
In addition to having a separate checking and savings account, you may also wish to open multiple accounts within each type to meet your financial goals. For example, you could designate one savings account for emergencies and another for Christmas and birthday gifts. You may have one checking account for your household expenses and another for your business. This is an especially good choice for individuals who aren't natural record keepers, as this is necessary when all of the money is lumped together in one account.
- Northwestern Mutual: Should I Keep My Money With One Bank or Many?
- Bankrate: 5 Reasons to Have Multiple Savings Accounts
- National Credit Union Administration. "Share Insurance Fund Overview." Accessed Sept. 6, 2020.
- FDIC. "Transparency & Accountability - Consumer Protection & Deposit Insurance." Accessed Sept. 6, 2020.
- Federal Reserve. "Regulation D, Reserve Requirements," Page 3. Accessed Sept. 6, 2020.
- Ally. "Online Savings Account: High Interest Savings, Rates & Reviews." Accessed Sept. 6, 2020.
- Capital One. "Online Savings Accounts: Performance 360." Accessed Sept. 6, 2020.
- Consumer Financial Protection Bureau. "What Is a Certificate of Deposit (CD)?" Accessed Sept. 6, 2020.
With features published by media such as Business Week and Fox News, Stephanie Dube Dwilson is an accomplished writer with a law degree and a master's in science and technology journalism. She has written for law firms, public relations and marketing agencies, science and technology websites, and business magazines.