There are a minimum of 5 bank accounts everybody needs, but even more might be right for you.
Between my business and personal accounts, I have financial relationships with seven (7!) different financial institutions. That seems like an obscenely high number, but truthfully each one serves a purpose in my financial blueprint. In fact, I think there are at least 5 bank accounts everybody needs.
There are at least 5 different bank accounts everybody needs — but even more might make sense!
Some people manage all their money out of one chequing account, but they miss out on rewards for their spending and returns on their savings. Others split their efforts over a dozen (or two) different accounts, but end up paying tons of fees and never earning enough rewards to do anything. Finding the right balance for you depends on what you’re trying to achieve with your money, but here’s my list of the five must-have bank accounts everybody needs to manage all your daily expenses and long-term goals.
1. A no-fee chequing account for day-to-day banking
If your bank is charging you any fees whatsoever to access your own money, ditch them and switch to someone who isn’t. Consumers have more choice than ever when it comes to financial institutions, and choosing one that will save you $10 per month will save you thousands of dollars over your lifetime. If you can find a bank that goes above and beyond by even paying you some interest for the balance in your chequing account, even better!
Your best options for no-fee chequing:
Your chequing account should be your mission control for taking care of your finances. This is where you deposit your paycheque, transfer money to savings or debt repayment, and pay any bills or make any purchases you don’t use a credit card for.
I currently bank with Tangerine and have for years! Not only do they offer no-fee chequing, they actually pay you interest on the money in your chequing account!
2. A high-interest savings account for your Emergency Fund
You need an emergency fund. It doesn’t matter if your job is super secure, you have ample insurance, and you’re in perfect health — the unexpected happens, and when it does, it’s often expensive. Most financial gurus recommend 3-6 months of essential living expenses saved, and that should ultimately be your target, but it takes years and years to save that. If you’re currently trying to do all-the-financial-things at once (pay off debt, save for retirement, buy a house), you can focus on building a small emergency fund of $3,000 or $5,000 first.
Not sure where to start? Check out my post of The 4 Best High-Interest Savings Accounts in Canada
Most people lament the thought of thousands of dollars in cash sitting in a savings account earning piddly interest when there are higher-return investment vehicles out there. It’s important to remember:
the purpose of your emergency fund is not to earn you the highest return possible, it’s to take care of you during emergencies.
If you’re prone to dipping into any cash on hand for “emergencies” like cheap flights to Las Vegas or a sale at your favorite store, you might want to set up your emergency fund at a different bank than you currently do your day-to-day banking at. Many online banks are ideal, because they can offer higher rates than brick & mortar institutions.
The highest interest rate is currently being offered by EQ Bank and is 2.30%!
3. A no- or low-fee cash-back or rewards credit card
Yep, one of the bank accounts everybody needs is not actually a bank account — but you still need it! If you’re responsible with your spending and can trust yourself not to ring up additional debt, a credit card is an essential financial tool in terms of convenience, rewards, security, and, of course, your credit score.
I like using a credit card for almost all of my day-to-day spending because it keeps track of all my purchases, earns me cash-back or travel rewards, and offers additional perks like purchase protection and car rental insurance. I also appreciate that when my wallet is lost or stolen, it’s easy to freeze or cancel a credit card, whereas cash is always gone for good. Likewise, using a credit card is ideal for shopping online (where I make virtually all of my purchases).
There are two cash-back cards that are best for your wallet:
The Tangerine Money-Back Mastercard, which lets you select the categories you spend the most money on to maximize your cash back, and has no maximum cash back you can earn:
The Scotiabank Momentum Visa Infinite, which gives you up to 4% cash-back on your purchases:
If you want all the perks of a credit card, but are still wary of spending more than you can afford, check out my newest favorite budgeting tool & spending tracker, KOHO. If you sign-up here, you can get up to a free $50!
4. An investment account for retirement
In addition to managing your everyday income and expenses, you also need to plan for the future. It’s great to save for retirement, but it’s even better to invest for it. Unlike you’re Emergency Fund which belongs in a simple savings account, the money you set aside for your future years should be earning you the highest return possible.
While on the list of bank accounts everybody needs, it doesn’t have to be a bank account. If you’re new to investing, a low-fee mutual fund or robo-advisor is a great place to start. If you’re comfortable managing your investments yourself, then a low-cost brokerage account is the best option for you.
I personally use Questrade to manage all my investments. They have super low fees which mean less of your money goes to commissions, and more can be used towards your financial goals.
Your retirement should be put away in a registered account. Depending on your income and where you live, this would mean investing under an RRSP or TFSA (Canada) or Roth IRA or 401K (USA).
RELATED: The TFSA vs. The RRSP
Choose your investment accounts and your investments carefully. Investing always comes with some risk, but that risk is higher if you don’t know what you’re doing.
5. A high-interest savings account for your goals
Whether your working towards a vacation or a down-payment on your first home or something else, a dedicated savings account is the best place to stash your cash to keep yourself from spending it, so of course it’s one of the main bank accounts everybody needs. If you’re disciplined, you can keep this at the same bank as your chequing account, but if you’re prone to robbing future you to buy something present you wants, you might want to consider keeping this at another bank, like you do your emergency fund.
Most banks will let you open an unlimited number of bank accounts at no cost, so you can open as many as you need for the number of goals you have. However, I would caution against opening more than three. Once you’re splitting your cash between that many things (plus emergency fund, plus retirement), chances are you’re not making any real progress on anything.
How many bank accounts do you have?