How Many Savings Accounts Should I Have?

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The number of savings accounts you should have depends on your financial situation. You’d most likely benefit from having an emergency fund and at least one other savings account. However, there are good reasons to have multiple savings accounts, depending on your personal savings goals.

How Many Savings Accounts Should You Have?

The right number of accounts for you depends mostly on what you’re saving for. If, for example, you want an emergency fund but plan to invest the rest of your spare cash through a brokerage account, one savings account may be all you need. If, on the other hand, you have multiple goals, consider opening a separate account for each.

Why Should You Have Multiple Savings Accounts?

Not everyone needs multiple savings accounts, but they’re a good idea for anyone who has more than one goal for the money they save. Having multiple accounts could make it easier to set a budget for meeting each of those goals and reduce the temptation to withdraw money prematurely.

Your savings goals might include:

• Emergency fund
• Rainy day fund
• New car
• Down payment for a home purchase
• Home improvements
• Large purchases such as furniture or expensive electronics
• Vacation
• Expenses you pay infrequently, such as property tax, car registration and professional fees
• Children’s education
• Retirement

Common Savings Categories and Funds

Here are types of savings that might benefit from being in a dedicated savings account.

Emergency Fund

An emergency fund is savings set aside expressly for financial emergencies or large unexpected expenses. Financial experts recommend having three to six months of monthly expenses in an emergency fund to start and eventually build up to six to 12 months’ worth.

Rainy Day Fund

A rainy day fund covers smaller expenses you haven’t budgeted for, such as a last-minute wedding gift or a small household appliance to replace one that’s on the fritz.

Sinking Funds

A sinking fund is for planned significant expenditures that are not part of the regular monthly budget. Examples include property taxes, insurance premiums and holiday gifts. The idea of a sinking fund is to put a small amount of money away each month for these future expenses so you have the money when the bill is due and you can avoid incurring debt to pay it.

Other Savings Goals

Any time you set a new savings goal — especially a significant one — you might want to consider keeping it in a dedicated account. Here are a few other savings goals that may require opening a new savings account:

• Vacation: If you like to take vacations (who doesn’t?), it’s a good idea to have a separate savings account that you can fund. This allows you to save smaller amounts per month toward an epic vacation in the future.
• Medical expenses: Medical expenses are typically infrequent, but can be a large expense when they do happen. Setting aside funds in a dedicated savings account for upcoming medical procedures or expenses can take the sting out of future medical bills.
• House down payment: Saving for a house is a huge undertaking these days and opening a savings account to start saving for a home is a great idea. You can shop around to find homes you love then figure out how much you’ll need as a down payment. This gives you a goal to shoot for and you can start saving monthly toward this goal. 
• College savings: If you plan to send your kids to college, setting up a dedicated college savings account can help. Even better, opening a 529 savings account allows you to save on taxes and invest the funds while saving for college.
• Home renovations: If you have a large upcoming home project, it’s a good idea to start saving up months or years ahead of time. You should have a separate account specifically to set aside money for home renovations.
• Other long-term goals: Any long-term goal — 6 months or more — should have a dedicated savings account. This helps you break down larger savings goals into manageable monthly deposits.

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Benefits of Having Multiple Savings Accounts

Dividing your savings into multiple accounts provides several benefits a single account can’t.

Protect Your Savings From Your Spending

One of the primary benefits of having multiple savings accounts is to protect your savings from your spending. Using an online bank account or opening a savings account at a different bank than your checking account makes it more difficult to access your money since it can take multiple days to transfer money back to your checking account. This can help reduce impulse spending.

Keep Your Finances Separate

While it might be easier to set up an automatic transfer to just one account each month, your savings goals might be challenging to track when the money is all in the same account. Having separate accounts — such as one for an emergency fund and another for a down payment on a home — makes tracking your goals easier and keeps your other funds safe should an emergency arise.

High Interest Rates and Account Bonuses

Some savings accounts offer account bonuses for opening a new account. This can earn you hundreds of dollars when opening multiple accounts at different institutions. Plus many high-yield savings accounts offer much higher interest rates than your regular bank savings account — earning you more interest while saving toward your goals.

Take Advantage of FDIC Insurance

The FDIC will cover up to $250,000 in combined account totals in the same ownership category for the same depositor. If you have more than that in a CD, savings account or money market account at the same bank, you should move some of that money to another bank to ensure that it’s protected.

Drawbacks of Having Multiple Savings Accounts

Juggling multiple accounts has some drawbacks you should consider before you move your money.

Maintenance Fees

Some banks charge monthly fees on savings accounts. Although it might be possible to have the fees waived, it could be difficult to maintain the minimum balances needed to qualify when you’re spreading your savings across accounts.

Harder To Earn Top Rates

Some banks offer tiered interest rates that increase with higher balances. If you don’t have enough funds in your account, you may not qualify for the best rates.

Difficult To Track

Some people struggle to stay on top of their finances. If you’re one of them, the burden of keeping tabs on multiple accounts might outweigh the benefits of having them.

How To Manage More Than One Savings Account

Managing multiple savings accounts might sound like a hassle but here are a few tips to help make it a cinch:

• Use multiple banks: If you are saving for different goals, it can be a good idea to use multiple banks for your accounts. This can help keep your regular monthly spending accounts and your long-term savings accounts separate.
• Automate your savings: Most savings accounts allow you to set up recurring deposits. This means you can deposit a set amount on a schedule — automating your savings goals across multiple savings accounts.
• Use a finance app: When you have multiple savings accounts and different banks, keeping track may feel cumbersome. But finance apps allow you to connect all of your bank accounts and track all of your finances in a single dashboard. This can help give you clarity on how you’re progressing toward your financial goals.

Types of Savings Accounts

Once you have an idea of your financial goals, you should consider whether you’d benefit from any (or all) of the following savings account types.

• Regular savings account: A regular savings account is usually paired with a checking account when you open a bank account. These accounts don’t pay much interest, but usually have minimal fees and low minimum balance requirements.
• High-yield savings account: A high-yield savings account has a higher interest rate than what you would find for a traditional savings account. High-yield savings accounts are ideal for short-term savings goals since you can easily access the money when necessary.
• Money market account: A money market account may feature a higher interest rate than most traditional savings accounts, but it also may require a larger minimum balance. However, if you do find a money market account with a minimum balance requirement you can meet, it might be another good option for short-term savings.
• Certificate of deposit: A CD typically offers a higher interest rate than a traditional savings account. Still, you lock the money into the account for a set period and generally face a penalty for early withdrawal. A CD is a good option for long-term savings that you know you will not need immediately, such as a home down payment or emergency fund savings beyond the initial three months’ worth.

Takeaway

Having multiple savings accounts requires more work, but it could be a helpful way to limit spending and stay on track to save for various financial goals simultaneously. You’ll have a better idea of how much you’ve saved for each goal, and you can often take advantage of higher interest rates.

If you decide that having multiple savings accounts makes sense for your finances, consider fees, APYs and balance requirements before selecting a financial institution and an account.

Barri Segal, Jacob Wade and Daria Uhlig contributed to the reporting for this article.

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