‘How many bank accounts should I have?’ is a question commonly heard at bank branches around Australia. However, it’s not a simple question to answer, as plenty depends on your personal circumstances and how you earn and spend money. While it’s necessary to have more than one bank account, there’s little reason to have more than you need to organise your finances, as fees can make a significant dent in your savings. Find out more about how to organise your household finances so everything flows smoothly with Savvy – then compare accounts to make sure you’re getting the best deal from your bank accounts.
There’s no magic number of bank accounts which will suit all people in all situations. How many accounts you should have will largely depend on your household structure: whether you’re part of a couple or family, a household of sharing flatmates or a single person. Broad opinion is divided between those who say ‘keep it simple’ and those who feel that multiple bank accounts for different purposes help with budgeting.
All households share common banking needs, such as the need to have somewhere to deposit wages, a method to pay the rent or mortgage, a credit or debit card to shop and pay bills online, and then somewhere to stash your savings.
Savvy can help you find the best bank account by providing simple and easy-to-understand comparison information to help you make the best choice of bank account for your needs. Some of the most common ways to arrange and establish your bank accounts are:
1. The traditional ‘four-way’ method of budgeting
The most traditional way of organising household finance in Australia is based around a couple with children, with each parent working. This method sees Mum and Dad having a personal transaction account each, and then sharing a joint transaction account and a joint savings account as a couple.
This means there are four accounts for the household. Each person’s salary is paid into their personal accounts. Both parents transfer an agreed amount or percentage of their wages into their joint transaction account to pay all household bills, and a portion to their joint savings account to save up for shared goals, such as a new car or holidays. Any remaining money is personal discretionary spending money.
A slight variation to this ‘traditional’ household budgeting method adds two more accounts: a home loan offset account and an emergency fund, which brings the total to six. Each parent has their wages paid into the mortgage offset account and transfers money to the household everyday account to pay bills. They have their own accounts for discretionary spending and also transfer a set amount into the joint savings account and emergency fund, which isn’t touched unless there’s a dire emergency.
A further consideration is reducing the interest you pay on your home loan if you have a mortgage. A mortgage offset account is a bank account linked to your home loan which you can deposit savings into. It doesn’t pay interest, but every dollar in the account offsets the amount you owe on your mortgage, so you’ll pay far less overall. This can save you thousands of dollars on the cost of your mortgage, if not more.
Life has a way of pitching curveballs at us. Natural disasters or unexpected medical diagnoses can rapidly change the course of our lives when we least expect it. For this reason, most financial planners recommended that everyone has an ‘emergency fund.’ This fund should be in a high-interest savings account earning interest, and should not be touched except in a genuine and dire emergency.
Ideally, a couple with children should put away the equivalent of six months of household income in their emergency fund. A single person should have at least three months’ wages put aside. With the number of bushfires, floods, droughts and other natural disasters that Australia has seen in the past decade, many Australians have been relieved to have a fall-back fund to help them through tough times.
2. The ‘multiple accounts for different purposes’ approach
A more complex approach to household budgeting is to have multiple accounts for multiple purposes. This method sees savers having a personal account and one household transaction account for all outgoings (including the rent or mortgage, utility bills, phones, internet and grocery shopping). They have another transaction account for their joint household income if they’re part of a couple, into which all wages are paid.
From this ‘income’ account, funds are automatically transferred into other accounts to pay bills, boost savings or any other reason. In addition to their ‘incoming’ and ‘outgoing’ accounts, they may have a mortgage offset account which is linked to their home loan, one or more main savings accounts and an emergency account (which isn’t used unless there’s an emergency). This could result in the household having at least eight accounts, if not more. These ‘active budget managers’ may have automatic transfers set up between their various accounts to ensure that money flows to where it’s needed each payday.
Find out which type of bank account is best for your needs by having a close look at Savvy’s account comparison information. You can also work out your household budget with Savvy’s free detailed budget planner calculator.
A compromise between the ‘keep it simple’ camp and the ‘multiple bank account’ camp can be achieved through a relatively new banking feature which is becoming more common in Australia: split bank accounts. These are a handy modern solution to the problem of how many bank accounts to have – and involves having one transaction account and one savings account, but splitting them into sub-accounts.
Some banks are now offering the opportunity to split a single account into sub-accounts for no additional fees. It’s possible to name each sub-account according to its intended purpose, such as ‘utility bills’ and ‘rent,’ or ‘new car savings’ and ‘holidays.’ Money can be transferred back and forward between the sub-accounts either automatically or through a banking app. Some banks allow you to have up to 12 sub-accounts, which act like different drawers in the one main filing cabinet.
All money in the named sub-accounts is pooled when it comes to reaching deposit or savings targets. Such split accounts could be the way of the future and may offer an ideal compromise suitable for all household budgeting systems.
The best everyday accounts in Australia have no account fees and no transaction fees. You shouldn’t be charged for using ATMs and there shouldn’t be any additional fees to have several debit cards attached to the one account. Choose an everyday account which has a mobile app compatible with your phone and smart watch so you can always have access to your funds and pay bills on the run if you’re short of time.
Some banks use Apple Pay, Samsung Pay and Google Pay, whilst others only allow one or two of these payment options, so be sure to select an account which works with your phone and digital wallet. As transaction accounts don’t usually accrue interest, look for an account with the most compatibility, the highest number of useful features and the lowest fees.