Savings accounts can offer a safe place to keep money that you may not need to spend right away. You can use savings accounts to set aside money for short-term financial goals or long-term ones. For different savings goals, you can open multiple savings accounts to manage those well. There are some advantages to opening more than one savings account when you have competing financial goals. Here are the tips for savings using multiple savings account.
How Many Different Savings Accounts Should I Have?
The shortest answer to this question is as many as you need. But the actual answer depends on how many different savings goals you’re working toward.
For example, your list of savings goals might include:
- Planning a vacation
- Saving money toward a down payment on a home
- Paying for home repairs or renovations if you already own a home
- Shoring up your emergency fund
- Saving money toward college expenses for your kids
- Planning a wedding
- Funding a move
- Saving for retirement
- Buying furniture
- Setting aside money to start a business
- Saving money for various sinking funds, such as biannual insurance premiums or property tax payments
Each of these goals is very different. For example, you might need to save tens of thousands of dollars for a down payment on a home. But your savings goal for paying insurance premiums may be less than $1,000.
Setting up multiple savings accounts for each goal could make it easier to track your progress. And, when you need to tap into those funds, you can do so without worrying that you’re taking money away from another goal.
Is It Smart to Have Multiple Savings Accounts?
Having multiple savings accounts could be a smart move if you have very targeted financial goals. As Forbes states It makes it easier to keep those goals separate and prioritize how much and how often you save toward them.
For example, say you have three primary savings goals: building an emergency fund, creating a new-to-you car-buying fund, and saving money for new furniture. You could then establish specific targeted goals for saving:
- $5,000 for your emergency fund
- $5,000 for your car fund
- $1,500 for new furniture
You can then break those goals down further by assigning a specific time frame to each one. So say you want to reach your $5,000 emergency fund goal in the next five months. You’d need to save $1,000 a month in that account to reach your goal.
You could then apply that same formula to each of your other savings accounts, so you know how much to put into each one to reach your goal.
When you’re saving money in one savings account, on the other hand, you may lose sight of those individual numbers and focus only on the total balance. It then becomes a little more difficult to know if you’re on track with your goals, especially if you’re saving for lots of things in the same account.
Separating savings goals into individual accounts is a more strategic approach that requires you to be mindful and intentional about how much you save each month. That is why multiple savings accounts are neceseray.
