4 reasons why you should have more than one savings account

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There’s no one right way to save — but when it comes to your savings account, sometimes more is better.

Having more than one savings account helps you separate your savings goals. You can take advantage of different interest rates, maximizing the growth of your savings.

Depending on your goals and how much money you have, it might be smart to look for additional accounts to stash your cash.

Here are four reasons why having multiple savings accounts makes sense.

1. You can keep track of your goals

Trying to save money for a bunch of different goals? Opening multiple savings accounts can help you keep them separate.

Imagine you have one savings account where you're saving for everything from emergencies to that dream vacation. It can quickly become a jumbled mess, and it's easy to lose sight of what you're actually saving for. But with multiple accounts, you can categorize your funds and give each goal its own space.

You can create different accounts for specific purposes — one for your emergency fund, another for a short-term goal (like a vacation), and one for a long-term goal (like a down payment). This way, you can easily see how much progress you've made towards each specific goal.

This visual clarity motivates you to stay focused and make smarter decisions about your spending and saving habits.

2. You can avoid dipping into your emergency fund

The foundation of your savings shouldn’t go toward any spending goal at all. Instead, it should be a safety cushion that can cover you in unexpected scenarios like job loss or a medical bill.

Having multiple savings accounts can help prevent you from dipping into your emergency fund unnecessarily. It's easy to overlook the purpose of your emergency fund when it's mixed with your everyday savings.

With a dedicated emergency fund, you create a psychological barrier that makes it less tempting to use that money for non-emergency expenses. You can see how much you've set aside for emergencies, making it easier to resist the urge to tap into it for other purposes.

This way, you can ensure your emergency fund remains intact and ready to support you when needed. Here are some tips on how to choose the best savings account for you.

3. You can maximize the interest you’re earning

Having multiple savings accounts can help you earn more interest on your money.

Here's why: Different financial institutions offer varying interest rates on their savings accounts. You can take advantage of the best rates available by opening multiple accounts.

Some savings products, like CDs, offer higher interest rates in exchange for locking up your money for a period of time.

Let’s say you have $20,000 in savings. You can put the amount you need for emergency savings ($10,000) in a high-yield savings account. That way, your money is accessible and earning interest. If you’re saving up for a car in three years and don’t need the money until then, you could put the other $10,000 in a 3-year CD that may offer higher interest rates.

Some banks offer tiered interest rates, where higher balances earn higher rates. You can reach those higher thresholds and enjoy increased interest by distributing your savings across multiple accounts.

“For money goals in the near future, consider setting up a high-yield savings account, which can help protect your savings from losing value due to inflation or market volatility,” says Keith Jones, senior financial adviser with Empower. “If the potential purchase is more than two or three years out, there may be better options than holding it as cash.”

Here are some other alternatives to a traditional savings account to consider.

4. You can keep all your money safe

If you have a large amount of money in your savings, having multiple accounts is essential to ensuring every dollar is protected.

Spreading your savings across different institutions lowers the risk of losing your money if there's a bank failure. The Federal Deposit Insurance Corporation (FDIC) in the United States insures deposits up to $250,000 per person per account. You can protect a larger portion of your wealth by dividing your savings across multiple FDIC-insured accounts.

How to manage multiple savings accounts

Multiple savings accounts come with many benefits, but there are downsides to consider. For one, there’s more work involved in managing more than one account, so be sure to follow these key tips.

• Know your minimum balance requirements. “It is becoming increasingly less common for savings accounts to have minimum balance requirements,” Jones says. “That said, if you do happen to have an account with a minimum requirement, it would make sense to prioritize savings first before considering alternative accounts.”
• Automate your savings. Set up automatic transfers from your primary checking account to each savings account. This ensures you consistently contribute to each account without remembering to do it manually.
• Watch out for fraud. Multiple accounts mean multiple targets for online thieves. Set up account alerts and use a strong password on your accounts.
• Review your money regularly. Set aside regular time to review your account activity and consider your progress toward your goals. How is your savings strategy working? As your priorities evolve, you may need to adjust the allocation of funds across different accounts. Rebalance your savings accounts to ensure you're on track to achieve your goals.

Does managing multiple accounts at different banks sound like a headache? Some online banks offer accounts that combine the features of multiple accounts in one. For example, SoFi offers a Personal Checking and Savings Account consisting of two linked accounts. This account has no monthly account fees and comes with competitive interest rates.

Ally and Capital One also offer tools that help you track progress toward individual savings goals rather than one large lump sum.

The bottom line

You likely have multiple reasons to save — buying a house, owning a car, or avoiding debt when an emergency strikes. To put yourself in a good position to meet all those goals, it can be smart to have multiple savings accounts. It’s a great time to open them, too. Interest rates have increased over the past year, and some banks offer attractive bonuses for new customers.

Before you open a new account, review the fine print to make sure you can meet the minimum balance requirements and avoid paying any pesky fees. Once you open the accounts, your work isn’t done. Review your account statements and monitor your progress to identify any chance to put even more money aside.

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