Many people have just one saving account where they save all their cash for a multitude of reasons. This may be simpler to manage but the downside is the inability to track the individual progress towards each financial goal. Having multiple savings accounts is the perfect way to allocate and track your money to goals more effectively.
Multiple savings accounts act like tangible targets helping you keep track of the progress towards your most important goals.
I used to be a saver who lumped all his cash into one savings account. It felt great seeing the balance grow but I would find myself withdrawing money from the account to cover a host of different expenses. In the end, I had no clue how I was using my savings and found myself short in funding my financial goals.
Eventually, I created separate savings accounts and titled each account for its purpose. I had the following:
- Emergency Fund – enough to cover one month of living expenses
- Vacation Club – money for my annual vacation
- Christmas Club – savings for holiday presents
- Dream Home Fund – savings for a downpayment on a house
- My Sexy Car Fund – savings for a new car
- Birthday Money – money to spend on family and friends birthdays
With my credit union, I titled my savings accounts as follows:
- My rainy day $500
- Family vacation $2000
By having the dollar amount in the account title, it helps set the target fund. In the event, I withdraw from the savings I can easily determine how much money I need to replenish the fund.
Reasons for Multiple Savings Accounts
One of the biggest gamechanger for my finances was separating my savings into different accounts. The ability to have my money allocated to specific goals kept me from dipping into an account for an unrelated purchase.
Prioritize most important goals
Having multiple savings accounts helps you visualize your most important goals. Each time you log into your accounts, you can quickly see why you’re saving. It will become harder for you to withdraw money from one account to spend on something unrelated.
Individualized targeted goals
For example, if your rainy day fund goal is $500 and your car fund goal is $5,000, separating into different accounts can make it easier to achieve your goals.
Each savings account is easier to track since it has a specific goal. You can see how you’re progressing towards your goals. It may also highlight the need to contribute found money or extra cash to reach goals sooner.
How to set up your multiple savings account
Setting up multiple accounts isn’t difficult. Many financial institutions allow you to open separate savings accounts online. And some offer sub-savings accounts without the need to open another account.
Follow these steps:
- Decide on your savings goals. What are you saving for? How much do you need? When do you need it?
- Open savings accounts or subaccounts. Find an account with no minimums and no fees.
- Title each account for specific reasons. Keep yourself focused and reminded as to why you’re saving money.
- Set automatic transfers. Basically, set it and forget it, so it’s funded each time you are paid. When you make it automatic, especially with multiple savings, you’ll find fewer reasons not to save.
Multiple Savings Accounts FAQ
How many savings accounts should I have?
There is no limit in the amount of savings accounts you can have. It all depends on how many savings goals you’ve identified. The only restriction you might have is from your financial institution. If that is the case, then choose to open online savings accounts which often don’t have a limit.
How can I manage multiple savings accounts?
The best way to manage multiple accounts is to have them with a single financial institution. Set up direct deposit or automatic transfers from your primary checking out into the various savings account. Also, consider the following:
- A bank, credit union, or online bank that offers subaccounts
- No minimum balance requirements
- No monthly fees*
- Automatic transfers capability
*It’s okay to pay for a service if it helps you achieve a goal.
Are deposits in my multiple savings accounts insured?
Check with your financial institution to determine how much of your savings are insured. There are specific guidelines from the FDIC (banks) and NCUSIF (credit unions) that outlines how much of your money is insured. Typically deposits are insured up to $250,000 per individual account holder. In some situations, your deposits may be insured for more.
How can I start saving if I have no money?
Accept the challenge to save money. Start small and remain consistent. Find at least $5 per paycheck to save towards one financial goal you’ve identified. I recommend starting with a rainy day fund. Also, make it automatic. After each direct deposit have the amount automatically transferred into a savings account.