Many people have just one savings account where they save all their cash for various reasons. This may be simpler to manage, but the downside is the inability to track the progress of each financial goal.
Multiple savings accounts act like tangible targets, helping you track progress toward your most important goals.
Reasons for Multiple Savings Accounts
Separating savings into different accounts can be a game-changer for your finances.
Prioritize the 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 and spend it 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 it into different accounts can make it easier to achieve your goals.
Track progress
Each savings goal is easier to track. You can see how you’re progressing towards your goals.
How to Set Up 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 savings focused and be reminded as to why you’re saving money.
- Set automatic transfers. Fund your goals 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 on the number 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 of your paycheck into your checking account and transfer an amount to each savings goal automatically.
Also, consider the following:
- A bank, credit union, or online bank that offers subaccounts
- No minimum balance requirements
- No monthly fees*
- Automatic transfers capability
*Paying for a service is okay 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. Specific guidelines from the FDIC (banks) and NCUSIF (credit unions) outline 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?
Start small and remain consistent. Find at least $5 per paycheck to save towards one financial goal. Start with a rainy day fund.