5 reasons to have multiple savings accounts


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Savings accounts are designed to be a safe place to stow away money so you can reach your financial goals. But if you’re saving for more than one goal, you might need more than one piggy bank.

Setting up multiple savings accounts can make it easier to save for several things simultaneously — an emergency fund, a dream vacation, a car down payment — by helping you identify goals and track your progress.

“Having multiple accounts can be a way to keep yourself on task with the specific goals you’re saving for, without the risk of funds getting commingled,” says Greg McBride, CFA, Bankrate chief financial analyst.

Here are five reasons for having multiple savings accounts.

1. Set targeted goals

If your emergency fund and your travel fund live in the same account, it can be tempting to raid your emergency savings in exchange for a few extra days at the beach. A single savings account can make it harder to see how much you’ve set aside for each individual goal; targeted savings accounts can put those goals in focus.

“We can easily confuse ourselves with mental accounting,” says Ryan Frailich, CFP, CSLP, and founder of Deliberate Finances.

Targeted savings goals spur good behaviors because they give people reasons to monitor their spending patterns to meet their goals. Setting up separate accounts for each goal can create boundaries, too. “It’s a big red stop sign that says: Do not touch unless it’s for this specific purpose,” Frailich says.

Frailich recommends assigning a nickname to each account you open. “If you set up a gift fund for your kids and grandkids, and it says ‘Christmas gifts’ on it, you are a lot less likely to tap that money than you would be if it just said ‘savings account,’” he says.

2. Track your progress

Having multiple savings accounts for different goals can help ensure you’re adequately saving for each one.

“It makes the scorecard really easy,” McBride says.

Being able to monitor each account’s balance and activity provides a clearer measure of progress on each goal. If your emergency savings fund goal is $6,000 and your vacation goal is $2,000, separating the two into different savings accounts could make it easier to see whether you achieved a goal and that your money is in the proper account.

To save in a painless fashion, McBride recommends automating regular transfers to these accounts. But you may want to keep your checking account at a different bank than your savings account.

“Keeping your savings out of sight, out of mind can help you make sure you don’t access it for anything other than the stated purpose,” Frailich says.

3. Prioritize your savings goals

High-priority goals can be easier to identify when they have their own dedicated accounts.

“You can focus on funding certain accounts first for higher goals, like emergency savings or upcoming wedding expenses, versus those that might be longer-term in nature and taking a backseat for now, like a future down payment on a home,” McBride says.

Shifting priorities can be easier when there are multiple savings accounts. For example, people who have to delay their vacation plans because of the pandemic might be able to redirect those savings to cover an unexpected expense, or another financial goal.

“You’re able to say, I’m going to lower this savings to meet this urgency,” Frailich says.

When you’re budgeting, consider using an app or website to make the process easier. For example, the fintech site Mint will automatically keep track of debits and credits so you don’t have to manually input them.

4. Get a bonus

To attract new customers and to set themselves apart from competitors, banks sometimes provide sign-up bonuses for opening new savings accounts. The amount of these cash incentives vary based on the specifics of the bank’s promotion, but a $200 or $300 bonus can help seed your savings for a new financial goal.

“Some banks may offer a bonus if you deposit a certain amount of money and keep it there for a specific period of time,” McBride says. “You might open a separate savings account to chase that bonus.”

5. Keep your money insured

The Federal Deposit Insurance Corp. insures up to $250,000 per depositor, per ownership category, per federally insured bank. If the amount of money you’ve deposited exceeds that amount, any money over and above the $250,000 limit could be at risk if your bank fails.

One way to keep your money safe is by creating multiple savings in different ownership categories, such as a single account versus a joint account. Or you could open accounts at multiple banks.

“Let’s say you sold a house and got a check at closing for $600,000,” McBride says. “One option would be to open savings accounts at three different banks and putting $200,000 in each account.”

What to watch out for with multiple savings accounts

Managing multiple savings accounts requires extra attention to keep from losing track of your money, McBride says. “By that, I mean knowing how much is where, what it’s earning, and whether you’re at risk of endangering fees for not maintaining a minimum balance or inactivity on the account,” he says.

With accounts at multiple banks, be mindful of how long it takes to make a transfer from one bank to the next — the payments system in the U.S. is not instant. “So just be cognizant,” Frailich says.

Featured image by MoMo Productions of Getty Images.

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