How Many Savings Accounts Should I Have?

How Many Savings Accounts Should I Have


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Should you open another savings account just because you can? When would it make sense?

We all know savings accounts are an excellent place to set aside our extra money until we’re ready to spend it. Not only do savings accounts protect our money, but they also pay interest, which will increase our balances over time.

But how many savings accounts should we have? Is two enough? How about five? Some people may think they only need one savings account for their goals, but that’s not always accurate.

If you’re asking yourself these questions, here’s everything you need to know.

Is It a Good Idea to Have Multiple Savings Accounts?

Having several savings accounts may be a good idea if you have multiple specific savings goals. This will help you prioritize how often and how much to save for each one. It will also allow you to keep funds for each goal separate.

For instance, let’s assume you have 4 specific financial goals: saving for a down payment on a home, buying a car, helping fund your child’s college education, and building an emergency fund.

With these 4 financial goals in mind, you could then create specific savings goals for each one:

  • $20,000 for a down payment
  • $7,000 to buy a car
  • $5,000 to help fund your child’s college education
  • $1,000 to build a starter emergency fund

Once you have created specific savings goals for each one, you can then specify them further by creating a time frame for each goal.

For instance, if you want to save $20,000 for a down payment on a home within 3 years, you will need to save roughly $556 per month to achieve your goal.

Use this formula to create a time frame for every one of your financial goals so you know how much to save for each one per month.

How Many Savings Accounts Should I Have?

The right number of savings accounts will be different for everyone. However, the simple answer is as many as you will need. Ideally, you should have a separate account for each one of your financial goals.

Depending on the goal, you may want a specific type of account. For example, if one of your goals is to save for retirement, you’ll want an account that provides tax advantages, like an IRA or 410(k).

If one of your other goals is to save for your child’s college education, you should look into a 529 plan, etc.

If you have a lot of savings, you will also want multiple accounts to keep your money insured, which we will discuss shortly.

Although, you don’t want so many savings accounts that you can’t keep track of them.

With that said, here are several examples of financial goals you may want a separate account for:

  • Down payment on a house
  • Paying for vehicle maintenance and repairs
  • Saving for retirement
  • Building an emergency fund
  • Funding your child’s college education
  • Planning a wedding
  • Saving for vacation
  • Funding a new business
  • Buying new household appliances
  • Paying annual taxes if you will owe the IRS

As you can see, most of these financial goals are pretty different. For instance, you may need to save $20,000 for a down payment on a house, while you only need about a thousand dollars for vehicle maintenance.

Having a different savings account for each financial goal will make it easier to track your progress towards each one.

Unlike only having 1 savings account, you won’t get tunnel vision on your total savings and lose focus on your progress towards each goal.

When you use these funds, it will also be easier to ensure you’re not using the money you saved for a different goal.

Benefits of Having Multiple Savings Accounts

From achieving financial goals to budgeting, there are many advantages of having several savings accounts. If you’re deciding whether or not to open multiple accounts, here are 5 benefits of doing so:

You Can Take Advantage of High Interest Rates and Bonuses

Not every savings account offers the same interest rates and APY they earn. Considering this, it’s important you evaluate the interest rate before opening a new savings account because it will determine how fast your balance will grow.

With that said, you may be able to take advantage of high interest rates by opening multiple savings accounts with different banks.

For instance, online banks typically offer a higher APY than traditional brick-and-mortar banks. These accounts online banks provide are known as high-yield savings accounts.

There are also many savings accounts that will allow you to earn higher rates if your balance reaches a specific amount.

For example, a high-yield savings account may offer one APY once you reach a balance of $15,000 and a higher APY once you reach $30,000.

Furthermore, many banks offer a welcome bonus to people who open a new savings account as a way to attract new customers.

For example, a bank may offer a $500 welcome bonus if you open an account and maintain a certain balance for a specific time frame.

If you currently only have 1 savings account, opening a few more at different banks will allow you to take advantage of a few of these bonuses.

It’s easier to Track Your Savings Progress

Although we discussed this earlier, it’s worth mentioning again. Having several savings accounts will make it easier to track your progress towards each one of your financial goals.

When all your money is in one account, it’s not clear where you stand on each individual goal. For example, how will you know how you’re progressing towards your down payment goal versus your emergency fund goal?

On the other hand, if you have separate savings accounts, one for each savings goal, you will easily be able to determine precisely where you’re falling short and where you’re on track.

You Can Automate Your Savings

With multiple savings accounts, you can set up automatic monthly transfers of specific amounts from your checking account to dedicated savings accounts for your financial goals.

For example, this may mean automatically transferring $300 per month to your savings account dedicated to a down payment, $100 per month to your savings account dedicated to your emergency fund, and $40 to your travel savings account.

This will prevent you from forgetting to save for your goals and make sure you stay on track to hit each one. It will also prevent you from building up one large balance, which could make you more tempted to misspend.

You’re Less Likely to Misspend Money

Simply put, if you have a separate savings account for each one of your financial goals, you’re less likely to misspend your savings on things it’s not meant for.

Each balance will be lower than if you had just one account, which will prevent you from feeling like you have extra money to spend on things you don’t need.

If you have money set aside separately for specific savings goals, you’re also more likely to feel guilty if you spend it on unnecessary things or discretionary expenses. In fact, this can help you break the of habit overspending.

You Can Keep Your Money Protected

As previously mentioned, one of the reasons to have multiple savings accounts is to keep your money insured if you have a lot in savings.

The Federal Deposit Insurance Corporation (FDIC) will insure your savings account, but only up to a specific dollar amount.

The current standard limit is “$250,000 per depositor, per FDIC-insured bank, per ownership category.”

In other words, if you have more than $250,000 in a savings account at one bank, the excess amount would be at risk if the bank goes under.

For example, if you had $450,000 in a savings account at one bank, $200,000 of your balance wouldn’t be covered. However, if you split it up between two accounts at two different banks, the total $450,000 would be insured.

Is There a Downside to Having Multiple Savings Accounts?

Now that you know the advantages of having several savings accounts, here are 4 potential disadvantages you should keep in mind.

You May Incur More Fees

If you’re not careful, bank fees can eat away at the interest you earn from your savings accounts. For example, a fee you should be wary of is a minimum balance fee.

If one of your accounts falls below a certain amount, the bank may charge you a minimum balance fee. If you have several savings accounts that don’t reach this minimum, these fees can quickly add up.

Another fee you should watch out for is an inactivity fee. You may be charged this fee if you don’t use one of your savings accounts often enough.

In fact, if you never use one, the bank may convert it to a checking account or even close it.

Here are a few other fees to watch out for:

  • Excess withdrawal fee: If you constantly withdraw money from your savings account, your bank may charge you an excess withdrawal fee.
  • Monthly maintenance fee: A monthly maintenance fee, also known as a service fee, is a fee your bank may charge you for simply having a savings account with them.
  • Transfer Fee: Some banks may charge you a transfer fee for external transfers.

You May Miss Out on High Interest Rates

While you can earn higher interest rates by having several savings accounts, that’s not always the case.

As previously mentioned, many banks tier their savings account interest rate. This means that you will only earn the highest rate available if your balance reaches a specific amount.

For instance, say you have 3 savings accounts with tiered rates and took the time to reach the minimum amount for each one to receive the highest possible annual percentage yield.

While, if one of your balances drops below the minimum amount, your APY may revert back to the lowest one.

Considering this, it’s crucial that you always read the fine print before opening a new savings account.

You May Be at an Increased Risk of Fraud

Whichever bank you decide to open a savings account with will most likely have fraud protection measures and tight security set in place.

However, the more savings accounts you have, the higher risk you’re at of being a victim of fraud.

For example, if you have 3 savings accounts instead of 1, there are 2 additional opportunities criminals have to access your personal information or steal your money.

It Can Be Difficult to Keep Track of Several Accounts

If you’re not well-organized, having several savings accounts can become difficult to keep up with, especially if every account is with a different bank.

In a worst-case scenario, you may even forget about one of your accounts altogether if you don’t use it frequently.

One of the best ways to keep your savings accounts organized is to use a personal finance app that allows you to sync each one.

However, it can still be tricky if you try to set up an electronic withdrawal or automatic deposit, for example.

How to Manage Multiple Savings Accounts

While having multiple savings accounts will make your finances more complicated, if done properly, managing multiple accounts is actually pretty simple. However, it will take some organizing and a bit of planning.

To stay organized, it’s essential that you track every aspect of all your savings accounts, such as:

  • What each account is for
  • How much you want to save in each one per month
  • Minimum balance requirements for the highest APY
  • Fees you need to avoid
  • Withdrawal limits
  • Etc.

One way to do so is to use a spreadsheet and/or a budgeting app that will help you track all your bank accounts.

When you open a new savings account, make sure to add it to your spreadsheet or app so that all this information is together in one place.

You can then review your spreadsheet or app on a monthly basis to make sure everything is going as planned, and nothing is falling through the cracks.

Frequently Asked Questions

Here are a few frequently asked questions about how many savings accounts you should have:

How Many Savings Accounts Should I Have for Budgeting?

You should have as many savings accounts for budgeting as you can properly manage.

This may mean only having 1 savings account or having 1 account for each of your savings goals. The correct number will depend on your individual situation.

Is 4 Savings Accounts Too Many?

Not necessarily. As previously mentioned, you may want to have a separate savings account for each one of your savings goals. If this means having 3 accounts, then have 3. If it means having 5, then have 5.

Just make sure you keep them manageable by staying well-organized. Consider using a personal finance app that allows you to sync each one.

How Many Savings Accounts Can I Have at One Bank?

Most banks will allow you to have several savings accounts. For example, Discover Bank allows you to open as many as you want.

However, most other banks do have a limit of savings accounts you can open, which differs from bank to bank.

If you’re wondering how many savings accounts you can have at a specific bank, simply contact their customer support and ask.

What Are the 3 Types of Savings Accounts?

Although there are many different types of savings accounts, the 3 most common are regular deposit, certificate of deposit (CD), and money market.

While each one has a very similar basic premise, they’re different in regards to interest and accessibility.

For example, CDs may offer higher rates than a regular deposit savings account, but they have much lower accessibility.

Final Words on Having Multiple Savings Accounts

Having multiple savings accounts is an excellent idea if you have several very specific savings goals.

With multiple accounts, it will be easier to track your progress toward each one, you can automate your savings, you’re less likely to misspend, and you can take advantage of high interest rates and account bonuses.

However, make sure you stay organized so they don’t get out of hand and become unmanageable.

If your savings accounts aren’t properly managed, the potential disadvantages of having multiple accounts may outweigh the advantages.

To keep your savings accounts organized, you should use a spreadsheet or budgeting app to track each one.

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