The number of financial accounts that you have is less significant than the types of financial accounts you have. Keeping five savings accounts does you no good if only one of them holds your money. In fact, it could cost you when these accounts rack up fees for monthly maintenance and/or inactivity.
So how many accounts should you have? As many as needed to help achieve your financial goals without incurring unnecessary costs.
Because various financial accounts — savings, checking, money market, CDs, credit cards, IRAs, 401k, brokerage and etc. — serve different purposes, just having one of each account will already present a large number of accounts to manage. Don’t forget that you may also have these accounts across different financial institutions.
You want to make it easy to review your finances so you identify where you are losing money and where you can improve your savings.
Read: How to avoid those common bank fees
Not surprisingly, you’ll open new accounts throughout life — some of which replace former accounts (e.g., transitioning from student checking to regular checking). If the purpose of a new account is to replace another, remember to close the old one.
However, there may be times when there are good reasons to have the same type of account, such as checking, with different banks. The advantages of doing this include more access to ATMs and backup access to funds in case something renders one bank unavailable.
When it comes to credit, there is a mix of approaches. While having more lines of credit means that you can build a higher credit score, it also means that you can borrow more and end up in debt. However, if you prefer to leave debt out of your life, you may want to have as few credit cards and loans as possible.
If you think you have too many financial accounts, consider a personal financial management tool that puts all account information in one place for easy review.
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