How to Use Multiple Savings Accounts - SmartAsset

Keeping your money in a savings account is a good way to keep a certain amount of money separate from your daily spending. While most savers prefer to keep their money in a single savings account, it’s possible to have more than one. Whether that strategy makes sense will depend on what your goals are and how much money you’re saving. Working with a financial advisor can be the easy way to figure out if this is the right strategy for you and how to execute it.

When You Should Have Multiple Savings Accounts

Opening your first savings account is the first step toward achieving your savings goals. However, you might have some savings goals that are more short-term and some that are more long-term. Before making a decision, consider a few different savings goals, such as:

Establishing an emergency fund
Saving for a trip to Europe
Opening a college fund for a child
Saving for a home

Not only do each of these goals have different time frames in terms of when you will need the money, but you may want to save money for more than one goal at a time. Any of these things can change how you use your savings accounts and when you should open a new one.

You may not want to drain your single savings account when it’s time to take your big trip as that would mean leaving nothing for your emergency fund or your house fund. Thus, while you can stick to just one savings account, having multiple accounts can make it easier to keep things separate.

How to Manage Multiple Savings Accounts

When set up properly, managing multiple saving accounts isn’t difficult. First, decide where you will keep your money. Options include a savings account at your bank, an online savings account or a cash reserve account.

It’s worth noting that some savings accounts allow you to create multiple savings goals – some call these savings “buckets.” That is something to look for as it might allow you to maintain a single account with a few savings buckets.

Once you have decided which account(s) to use for your savings, the next step is to decide how much to allocate to each goal every month. You can then link your bank account and set up automatic monthly transfers to each goal.

Pros and Cons of Multiple Savings Accounts

Having multiple savings accounts comes with its own set of pros and cons. Keep in mind that the importance of each will depend on what’s important to your financial plan or goals. Here’s what to consider before getting started:

Pros

Keep goals separate: It’s easier to keep separate savings goals separate. Since each account has a distinct purpose, you don’t have to worry about making sure your vacation fund doesn’t deplete your house fund and vice versa.
Sign-up bonuses: Some savings accounts have sign-up bonuses, meaning you could take advantage of multiple bonuses. These bonuses usually aren’t as lucrative as credit card sign-up bonuses, but every bit helps.
More cash insured: While the average person doesn’t have more than $250,000 in cash at any given moment, that is the maximum amount insured by the FDIC. In other words, if you have $275,000 in a savings account, $25,000 of it won’t be insured. But if you open another savings account at another bank, not the same bank, and transfer the $25,000 to the new account, the entire $275,000 will be insured.

Cons

Can be tougher to maintain: Having multiple savings accounts could be harder to maintain in some cases. This shouldn’t be a problem if you set up automatic transfers. Plus, you can use a personal finance app that tracks all your various accounts, letting you see them in one dashboard. But if you are trying to maintain each account separately, transferring money to each account manually would be quite a bit of extra work.
Potentially lower APY: Say you have a savings account with your traditional bank, an online savings account and a cash reserve account all at once. The annual percentage yields (APY) on all those accounts will be different at any given moment. Thus, maintaining multiple accounts inevitably means your average APY won’t likely be the highest possible rate.
Fees: Banks can sometimes charge fees, such as a $25 monthly maintenance fee if your account balance is below a certain amount. Having multiple savings accounts naturally means you’ll be more likely to be under the limit on one of your accounts.

Bottom Line

Having multiple savings accounts can be a great way to keep your savings goals separate so they don’t interfere with one another. You wouldn’t want to deplete your house fund because you decided to take a nice vacation. Also, keep in mind that some savings accounts allow you to create multiple savings “buckets” which might allow you to maintain a single savings account with multiple savings goals. The right savings strategy for you will depend on what your overall financial goals are and how much money you have available to help you reach those goals.

Tips for Saving Money

It can be hard to know whether you’re on track with your savings. After all, there is a lot to think about. A financial advisor can guide you through major financial decisions, like deciding how much to save. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Saving money is an important part of working toward your savings goals. See if you’re on track to meet your savings goal with our savings calculator. It allows you to add your APY, so you can see the difference that savings accounts with higher APYs make.