Opening a savings account is a safe way of keeping your money. But then, you can have more than one savings account. There are several key reasons to consider opening multiple savings accounts and one of the top reasons is that it can help you organize your finances and channel your savings towards achieving a specific goal.
There’s no restriction to the number of savings accounts you can open, especially in multiple banks, but at some point, you may begin to find it hard to keep track of your deposits.
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Why Use Multiple Savings Accounts?
Why exactly do you need multiple savings accounts? Depending on your personal and business goals, having more than one savings account will be required to help you meet different goals. Here are some key reasons to consider.
Keeping Multiple Savings Accounts Helps You Keep Focus On Your Goal
When you have a different savings account that is specifically opened to meet goals such as going on your long-desired Vacation. Set up multiple savings accounts to make these goals a reality. When you automate your savings for different purposes, you’ll make it more attainable than when you have to decide what you save every time you earn. No doubts, you may be tempted to spend from your checking account especially when you have a good amount there. But when this amount is directed into a sub-savings account, you know it is targeted at meeting specific needs.
You Can Make Automated Monthly Transfers
The most effective way to make your savings goal a reality is when you do not have to influence the process once it is set. Automate your savings from your primary account. With that, you’ll have money in the right place and also have the savings process attained without even thinking about it.
You can move your money within the same bank or consider bank-to-bank transfers, which are mostly free for shifting funds from one bank to another.
It Becomes Easier To Track Your Savings Progress With Different Accounts
When you have different accounts earmarked for different purposes, you’ll be able to monitor your progress towards each goal. You can also label each of your sub-savings with their purpose and track your overall financial plan.
You Can Hold Yourself Accountable
Everything begins and ends with you. You can make a plan, but if you do not put in the required effort to make it a reality, it will fail. While saving money, it is important to understand everything that is going on and keep track of how your money moves.
Be aware of the situation you are in and take advantage of everything necessary to advance in attaining your financial goals. Keep track of your attitude towards your traditional savings account and make necessary adjustments.
You’ll Better Smoothen Your Spending
When you have dedicated savings account you will be able to budget for substantial yearly expenses. For instance, you can use your savings account for homeowners insurance and property taxes if you pay annually. Save up through your savings account as an alternative to using an escrow account by spreading it out.
With Different Savings Accounts, You Can Create A Workable Savings Goal With Your Partner
If you and your partner have decided to merge your finances and probably still want to have some level of privacy or autonomy, you can consider opening several savings accounts while also retaining individual accounts for expenses you’ll wish to make without interference. You could also create an account for joint expenses.
Sit down together to discuss how you’d wish to handle your finances while also putting up a structure that feels perfect for both of you.
Stay Motivated To Build Momentum
When you start seeing progress in your savings, you’ll be motivated to keep progressing to keep reinforcing your attitude towards savings. Keeping a focus on your goals while recording regular progress will help build the required momentum to achieve more.
Get Your Savings Insured
If you have achieved a considerable amount in your savings, you can open more accounts in other banks to make it below the FDIC insurance limits of $250,000 which is typically for an account in each financial institution. So, you may better consider having a separate account for excess funds in a different institution to stay secured. Ensure that the bank is not under the same coverage. You may also want to ask a bank staff member for further information if your account possibly exceeds a savings of $250,000. The
How to Use Multiple Savings Accounts
Now that you have discovered the key reasons for having multiple savings accounts, you can strategize and effect the plan.
You can open sub-savings accounts with your primary account. Several online and traditional banks make this feature accessible to their customers. Harnessing online banks will offer you other benefits such as:
No monthly fees. You do not have to incur monthly fees that are specifically associated with traditional banks.
No account minimums. You can start small since there is no rigid minimum amount that your account must hold.
Competitive interest rates. Online banks offer competitive interest rates that will help boost your savings.
Automate your savings goals. You can simply automate your savings plans once you have decided on how much you’ll prefer to save every month. This approach helps to ensure that your plan is actualized while also avoiding the temptation of influencing the process. To ensure that you stick to your savings, link your primary checking account with your savings schedule automatic transfers for every payment period.
You may also want to find out with your employer if it is possible to split your earnings among multiple accounts. That approach will help you avoid shuffling funds and messing up your transaction history.
Create A Sub-Savings Accounts for Different Categories
Label your sub-savings accounts in different categories based on your goals, but avoid going overboard. You may want to consider different broad categories as a guide for your number of savings accounts. For instance, you can dedicate one account vacation and another to emergency savings to avoid making unstipulated expenses from any of them. You can open as many as would help attain your financial goals.
Examples of accounts to think of include weddings events, education expenses, vacations, home purchases, down payment on a house, and others.
In conclusion, having several accounts will help you prioritize your goals. Even when you do not have the financial capacity to fund high-priority goals, you can potentially ‘borrow’ from lower-priority accounts. However, ensure to stick to your savings goals. It is counter-productive to borrow from other important goals, even though situations may be hard sometimes and you may be forced to take certain unplanned steps. But it is always nice to have different options in those situations.