banking

How many bank accounts do you need?

Banking » How Many Bank Accounts Do You Need?

Should an account be goal-specific?
Should an account be goal-specific? © karen roach/Shutterstock.com

A savings account doesn't have to be for a specific purpose, but many savers choose to create a separate account if they're trying to build a lump sum for a specific purpose, such as a down payment on a home or a rainy-day fund in case of an emergency like an illness or job loss.

While spreading your savings across multiple accounts will slow the amount of money you make on interest, it's not necessarily a bad idea to have a goal-specific savings account, according to Mark Johnson, assistant professor of finance at Loyola University Maryland in Baltimore.

"It makes sense to have separate savings accounts under two conditions: if it helps you reach your goal and you're able to regularly monitor the accounts to make sure no unauthorized transactions have occurred," Johnson says. "Many savers are just happy to see their savings balances grow, regardless of whether the funds are for a specific purpose or not."

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