Your savings account can be used in so many ways to achieve your financial goals. You can set aside some cash and get interest on it that can accumulate over time.
Most people would rather stick to one savings account to meet their needs but they can actually achieve more with multiple savings accounts at several banks or even from the same bank.
Having multiple savings accounts can be beneficial for several reasons without impacting your credit. So there is really no reason not to open extra savings accounts especially if your financial goals requires it
According to Greg McBride, CFA, Bankrate chief financial analyst, “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.”
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Consider These 5 Top Reasons To Open Multiple Savings Accounts
1. Keep Track Of Your Progress
You might want to save for a vacation, a new home, or an emergency. If you save your home funds and vacation funds in one account, you might find it difficult to keep track of your financial progress. You might get tempted to use funds allocated for either of your projections for other needs.
A single savings account has a high tendency of stifling your plans and making it harder to have a clear understanding of how much has been set aside for your individual goals. But with specific savings accounts channeled towards achieving the different goals, the goals can appear clearer and more in focus.
Consider opening different accounts for each of your separate goals. Each of the savings account balances will provide you with clear visibility of your savings to date per goal. Targeted savings goals encourage the right attitude towards achieving the goals.
You’ll also have boundaries set. Just as founder of Deliberate Finances, Ryan Frailich affirmed. He said, “It’s a big red stop sign that says: Do not touch unless it’s for this specific purpose.” He suggests that you should rather consider 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,’” Frailich added.
2. Automate Your Saving Habits
One of the most convenient ways to make your savings goals possible is to make it run on its own without you thinking about it. Once you have finalized how much you want to go into each savings account every month, you can automate it so that the deductions are done regularly without you having to interrupt the process.
Setting automatic transfers for each account will ensure that your savings continue to grow till the purposes are achieved. You can liaise with your bank to transfer funds every week, month, or other specific stated dates to your different savings accounts. You can also engage apps such as Dobot or Digit to
3. Cut Down On The Possibility Of Misspending
With one savings account housing all your money, you would feel tempted to dig into it for your wants. And since you can access all your funds with just one single transfer, you can easily destabilize your goals.
But if you open multiple savings accounts, there will be reduced cash figures in the accounts and will make it hard for you to think you have lots of money stashed up somewhere. This stifles your spending habits.
Having different accounts in different banks is likely to be more effective than having them in one bank. Before you can use cash, you may have to transfer it from your savings account to your checking account and maybe be patient for some days to finalize the process.
With the extra steps required to use money, it reduces the tendency of having to dig into your savings for your wants. You will also enjoy a clearer measure of progress on each goal.
4. Leverage Bonuses Available The Accounts
As a new customer in most traditional banks, it is very likely that you’ll receive bonus offers for your initial patronage. Oftentimes, you’ll receive these bonuses from your savings accounts when you open an account and maintain a particular balance for at least a stipulated period of time.
Bonuses differ from bank to bank, and they can run into some hundreds of dollars. So, it is worth finding them if you have a good amount of money to spare.
Now, when you have multiple savings accounts distributed in different banks, you can use the money you receive as bonuses across the accounts to speed up your savings goals.
5. Insure Your Money
One big benefit of harnessing savings accounts for your financial goals is insurance from the Federal Deposit Insurance Corporation (FDIC).
With the FDIC, you’ll receive up to $250,000 in insurance, per account type, per depositor, at banks that have their coverage. If you have deposited $250,000 and above, the money could be at risk if your bank fails, as $250,000 is the limit.
If you have cash beyond the savings limit of $250,000 to distribute in your savings accounts, ensure you put them in accounts at different banks. Putting them in different banks will increase your chances of securing your money better
So, if you have $300,000 in a savings account at one bank, since it already exceeds the savings limit, $50,000 of your money is not protected. But if you put $150,000 in two separate bank accounts, your total money will be insured.
How To Manage Multiple Savings Accounts
Managing multiple savings accounts can be quite confusing and stressful. But you must ensure to keep track of every account including the amount of money in each of them, what they are earning, and the potential fees they amass.
It’s better to consider accounts without fees, so you do not have to worry about their monthly fees and their required minimum balance.
There are also several savings and budgeting apps that can make achieving your financial goals less cumbersome. When you create a new account add it to the app or spreadsheet so as to be able to manage all your financial accounts in a single place. This will help to ensure that nothing falls through the cracks.
How Many Savings Accounts Is Ideal For An Individual?
There is really no specific figure to the amount of savings accounts you should have. It all depends on your financial capacity and goals. For instance, if you have a lot of cash to save, open multiple bank accounts to insure all. Just be sure that the accounts you open are such that you can easily manage.