Multiple Savings Accounts—A Smart Choice For Anyone
April 11, 2023
6 min read
Want to make money management easier? Try splitting your savings up into multiple bank accounts! It's a simple solution that many personal finance pros swear by for helping people get on top of their finances.
With two or more different accounts, you can strategically reach big financial goals and enjoy added peace of mind as each account serves its own purpose—with absolutely no extra effort required on your part.
What Is a Savings Account?
Savings Accounts are a great choice for those looking to secure their financial future. The interest earned on deposits means your money is growing while remaining safe and accessible.
It also allows you to save without worrying about market fluctuations or potential losses since the funds in your Savings Account are FDIC-insured. With the assurance of up to $250,000 per depositor in the event of a financial institution failure, you can rest easy knowing your money is secure.
Features such as ATM access and the ability to link to other accounts can also be beneficial, depending on your individual needs. Take some time to research the different savings accounts available to decide which is best for you.
How Does a Savings Account Work?
Opening an account is easy and straightforward—simply stop by your local bank or credit union, or hop online if that's more convenient. Provide the details they need and deposit what you're willing to put aside.
After you deposit money into a savings account, it will accrue interest—the perfect way to get returns on your investment. The amount of additional income depends on multiple elements, such as the stated APY rate tied to that specific account, how much is deposited in total, and even how long those funds remain untouched within the bank.
Your bank can turbocharge your investments by compounding the interest daily, monthly, quarterly, or yearly! Each passing period will reward you for what is deposited into your account and any new funds accrued from interest.
Should You Have Multiple Savings Accounts?
Dipping into multiple savings accounts could be a savvy tactical decision to help reach all your financial objectives. Separating funds for different goals allows you to match each priority's importance and ensure steady progress toward them all.
Setting clear savings goals is essential to building financial stability. For example, you could establish three significant targets:
- $5000 - Car Fund
- $5000 - Emergency Fund
- $3000 - Travel Fund
Further breaking down objectives can be helpful—if you want your emergency funds saved in 5 months or less? Then plan on setting aside about $1000 each month until it's achieved!
Having multiple savings accounts can be a clever way to boost the power of your money. This approach allows you to actively choose how much goes into each account and keep track of your progress—so it's easier than ever to get ahead on saving!
Benefits of Having Multiple Savings Accounts
Multiple accounts offer an effective and efficient way to meet financial goals, with a variety of advantages on top. From increased flexibility and control over finances to diversifying risk protection in case one account dips—unlocking the potential for more growth through multiple savings accounts could be essential.
Here are some of the primary benefits of having multiple savings accounts:
1. Variety of Interest Rates
When it comes to savings, not all accounts are created equal. Certain bank and credit union products can offer more lucrative interest rates that may result in greater rewards over the long term. To get your money working for you, make sure to consider various account options and compare their respective returns.
However, you may need to meet certain minimum deposit requirements or keep an allotted balance for this kind of extra return on investment. It might be wise also to consider stashing some cash away in another regular checking/savings account that won't limit transactions and withdrawals—great for everyday purchases!
2. Achieve Different Goals
Diversify your savings for long-term stability. Separating funds into different accounts helps you effectively track progress towards whatever financial goals you set, be it a vacation, DIY renovations, or retirement planning!
Getting organized can be a key to success when it comes to financial management. Having multiple accounts can help you stay organized and financially disciplined. You could set up a separate account for each of your financial goals, such as saving for retirement, buying a home, going on vacation, or building an emergency fund.
3. Budgeting and Saving Made Easy
Sticking to a budget and saving money are two primary components of successful financial management. A great way to accomplish both goals is by setting up multiple bank accounts—one for spending and another strictly for savings. This strategy makes it easy to manage your monthly expenses while still keeping some funds aside!
4. Great for Couples
Financial harmony in marriage should include understanding how to manage your individual and shared expenses best. A great way to accomplish this is by categorizing income into three “buckets”: "my money," "your money," and, most importantly, the separate account of "our money."
It can be used for mutual costs like utilities or housing payments while enabling each partner autonomy with their finances. This type of financial structure is valuable for couples to maintain separate identities within the union.
How to Open a Savings Account
Research the different types of savings accounts available, such as a traditional bank account or a money market account. Compare the annual percentage yield (APY), minimum deposit requirements, and any monthly fees associated with each type of savings account.
Gather all required documents to open an account, such as proof of identity and address. Contact your local bank or credit union to inquire about their savings account offerings and application process.
When opening a new savings account, consider setting up direct deposit from your paycheck into the account each month. It will help you reach your saving goals faster while avoiding the temptation of spending it on non-essential items.
Automating your savings with a transfer from your checking account to the savings account is another great way to ensure that you reach your financial goals. Set up an automatic payment from your checking account at predetermined intervals, such as once or twice a month, and watch your savings grow over time.
Keep track of your progress by monitoring your bank statements regularly to ensure that the correct amount is deposited into your savings account each month. This will help you stay on top of your finances and see how much you have saved over time.
Take advantage of online tools and apps available for budgeting and tracking your savings goals. These can help you identify areas where you can save more money and provide helpful reminders when transferring funds into your savings account.
The Bottom Line
Deciding how many savings accounts you should have is an individual choice, as it depends on your needs and goals. However, having at least two savings accounts is generally recommended. One account should be dedicated to day-to-day expenses, while the other can be used as a ‘piggy bank’ for saving money for the future.
Remember to compare all the offers available in your area and to look past the interest rate to other factors that could affect your account. Once you’ve found the perfect account, stick with financial institutions endorsed by the Federal Deposit Insurance Corporation (FDIC) or its local equivalent. With these tips in mind, finding a high-yield savings account doesn’t have to be difficult.
