How Many Savings Accounts Should I Have?

Determining the right number of savings accounts is a personal decision, but having multiple accounts can be a smart strategy. While there’s no limit to the number of savings accounts you can have, it’s essential to ensure you can manage them effectively.

Why Multiple Savings Accounts?

Having several savings accounts can help you keep track of various savings goals. Here’s why you might consider having as many savings accounts as you have savings goals and what to consider when choosing a savings account.

Key Takeaways:

• Multiple savings accounts can help manage different savings goals.
• Consider how many accounts you’re comfortable managing.
• You can have multiple accounts with one bank or spread them across several institutions.
• Be mindful of FDIC limits, interest rates, fees, and minimum balance requirements.

How Many Savings Accounts Should You Have?

There’s no specific number of savings accounts you should have, but opening more than one is a common strategy. “Some may find it helpful to have more than one saving account, thus an account for each item or goal,” says Matt Gromada, managing director at Chase.

Most people have different savings goals with varying amounts and timelines. For example, you might save for a car in two years while also saving for a vacation in a few months. Just as you might allocate different jars for different savings purposes, you can use savings accounts similarly.

Emergency Fund Savings Accounts

Everyone should have a savings account specifically for emergencies. This account can cover unexpected expenses like car repairs or medical bills without going into debt. Many experts recommend saving at least three months’ worth of living expenses in an emergency fund. Having a separate account for this purpose ensures these funds are used only for genuine emergencies.

Additional Savings Accounts

Depending on your savings goals and how many accounts you can comfortably manage, you might open separate savings accounts for:

• Vacation funds
• Home improvement projects
• Down payments for a car or home
• Back-to-school or holiday shopping
• Special celebrations like weddings or anniversaries

Where To Open Savings Accounts

You can keep all your savings accounts with one bank or spread them across multiple banks. Keeping your funds at one bank simplifies management through a single app. However, if you have more than $250,000 in savings, you might want to distribute your funds among several banks to ensure they have FDIC protection.

Other benefits of having savings accounts at different banks include potentially higher earnings from higher interest rates and eligibility for new account bonuses.

Pros and Cons of Having Multiple Savings Accounts

Pros:

• Broader FDIC-insurance protection: The FDIC insures up to $250,000 per depositor per bank. Spreading your funds across multiple banks can protect your savings.
• Staying organized: Individual accounts for each goal help you track progress and stay committed.
• Potential bonuses and higher yields: Opening new accounts can allow you to take advantage of promotional offers and higher interest rates.

Cons:

• More accounts to manage: More accounts can make it harder to keep track of your savings.
• Potential minimum balance requirements: Some accounts require a minimum balance to avoid fees.
• Potential lower interest rates: Spreading money across multiple accounts may result in lower overall interest earnings.

How To Manage Multiple Savings Accounts

Use Account Nicknames: Label each account (e.g., “vacation fund,” “emergency fund”) to easily identify them online.

Seek Out Competitive Interest Rates: Shop around for competitive rates. Some banks might adjust rates based on your account balance.

Automate Your Savings: Set up automatic transfers to your savings accounts to ensure consistent contributions without the hassle.

Understand FDIC Limits: The FDIC insures up to $250,000 per account holder per bank. Consider joint accounts or accounts at different banks to maximize coverage.

Other Tips for Smart Saving

Prioritize Emergency Savings: Ensure your emergency fund is well-funded before focusing on other savings goals. Set incremental goals, such as saving $1,000 by the end of the year.

Create a Savings Rule for Extra Money: Allocate a percentage of any unexpected income (bonuses, tax refunds) to your savings goals.

Consider Other Savings Options: Beyond savings accounts, consider investing in stocks, bonds, or retirement accounts to grow your savings.

Should You Keep All Your Savings in One Bank?

Keeping all your savings at one bank offers convenience but be mindful of the $250,000 FDIC coverage limit. Spreading your savings across multiple banks can ensure full protection.

The Bottom Line

Savings accounts are excellent tools for safeguarding your money and achieving financial goals. Aligning each goal with a separate account can help you track progress effectively. Be aware of FDIC insurance limits, interest rates, and fees when managing multiple accounts. Consulting a financial advisor can provide personalized advice on managing multiple savings accounts to fit your financial situation.