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5 reasons to have multiple savings accounts

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Single mother playing with young sons in front of house
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A good savings account keeps your money safe and pays interest, which can help your balance grow over time.

Many consumers assume they only need to have one savings account to meet their needs, but that isn’t always the case. Having multiple accounts — at the same bank or different banks — can be useful for managing different savings goals, and there’s little harm in doing so, since it doesn’t impact your credit.

“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.

There are several ways that having multiple savings accounts can help make managing your personal finances easier.

1. Track your progress

Having one savings account while saving for multiple goals can make it difficult to keep track of priorities.

If your emergency fund and 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 also make it harder to see how much you’ve set aside for individual goals; targeted savings accounts can put those goals in focus.

For example, you might want separate savings accounts for:

  • Buying a car
  • Going on a vacation
  • Having some cash set aside for emergencies

With a savings account designated for each major goal, it’s easier to monitor spending patterns, which in turn can encourage you to practice better saving habits. Separate accounts can help create boundaries, too.

“It’s a big red stop sign that says: Do not touch unless it’s for this specific purpose,” says Ryan Frailich, CFP, CSLP, and founder of Deliberate Finances.

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. Find the best yields

As interest rates go up, you may be looking for what banks are offering the most competitive yields on their savings products.

One way to make it easier to earn the highest rate is by having multiple accounts open with different banks. Then, as rates change, money in the accounts can be moved accordingly, to get the best yield on the highest balance. As a short-term investment strategy, having multiple accounts can help you build up your savings faster.

Shop around for the banks that offer the highest rate on savings.

3. Reduce the chance of misspending

If you have one savings account with a lump of money sitting in it, it’s easy to feel the temptation to spend it. Having all the money in one place also makes it easier to spend because the funds can be moved to a checking account with a single bank transfer.

One way that having multiple accounts can minimize the chance of misspending is by splitting up the savings balance into categories, so you see how much is actually saved for each goal. The balance won’t appear as one large sum, so it becomes more clear how much is available for spending.

Having multiple accounts also adds barriers to spending your money, especially if those accounts are at separate banks. Before you can spend the money, you’ll need to transfer it to a checking account, and that transfer may take a few days to complete if done between separate banks. Adding these additional steps can make it easier to avoid the desire to spend your savings.

4. Take advantage of available bonuses

One common strategy that banks use to draw in new customers is to offer bonuses to consumers who open new accounts.

Usually, to earn a bonus from a savings account, you need to open an account and maintain a certain balance for a period of time. These bonuses can be worth hundreds of dollars, so they’re worth looking for if you have enough money to set aside.

Opening savings accounts at multiple banks gives you the opportunity to earn more than one of these bonuses. That bonus money can go towards savings goals.

5. Keep your money insured

One of the things that makes a savings account one of the best places to store extra cash is insurance from the Federal Deposit Insurance Corp. (FDIC). The FDIC offers up to $250,000 in insurance, per depositor, per account type, at covered banks.

If you have more than $250,000 in your bank accounts, any money over that amount could be at risk if your bank fails. However, splitting your balance between savings accounts at different banks keeps your money safe, since each bank has its own insurance limit.

For instance, if you have $300,000 in a savings account at one bank, $50,000 of your balance isn’t protected. If you instead put $150,000 into savings accounts at two different banks, your full balance will be insured.

How to manage multiple savings accounts

With more accounts to keep track of, it requires a bit more work to stay on top of how much is where, what each account balance is earning and what fees are being charged.

One way to make things easier is to focus on fee-free accounts, which saves you the stress of having to remember each account’s monthly fees or minimum balance requirements.

A spreadsheet is a useful tool for organizing all of your accounts’ information. Whenever you open a new account, add it to the spreadsheet so you have a single place you can use to keep an eye on all your financial accounts.

There are also numerous personal finance apps that can help you track and build your savings.

How many savings accounts should I have?

In short, the amount of savings accounts that’s right for you depends on your personal finances. Someone with a lot of money may want to open multiple bank accounts to ensure that all of their wealth is federally insured.

Another factor to consider is how many savings goals you have, since you may want to have an account for each major goal, or group different types of savings goals into distinct accounts.

Savings goals you may want to have multiple accounts for

Bottom line

Having multiple savings accounts requires more work, but it could be a helpful way to limit spending and stay on track to meet savings goals. You’ll have a better idea of how much you’ve saved for each goal, and you can take advantage of higher rates and sign-up bonuses.

Make sure to keep the various accounts’ information organized, so that you don’t miss out on any fees or fraudulent account activity.

–Freelance writers Autumn Cafiero Giusti and TJ Porter contributed to previous versions of this article.

Written by
René Bennett
Banking writer
René Bennett is a writer for Bankrate, reporting on banking products and personal finance.
Edited by
Wealth editor