AWS RDS t2-micro running MySQL 5.5 most of the time it gives “too many connections” error. As per the DB instance type t2-micro it allows 66 maximum connections concurrently.

There is option to increase this max DB connection value by creating a DB parameter group for this Micro instance. 

But does it affect when we increase DB connection without upgrading DB Instance type?

Each connection carries the load of per-connection buffers as set by these parameters
Changing the number of connections increases the amount of memory each connection can demand to this : (join_buffer_size+sort_buffer_size+read_buffer_size +read_rnd buffer_size) X max_connections

Amazon has to set the number of connections based on each model’s right to demand a certain amount of memory and connections.