How Many Savings Accounts Should I Have?

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I’ve said this many times, but let me say it again: saving money is important. From growing your emergency fund to cutting away at debt or saving for a new car or a down payment for a new house, saving money is the basis of good personal finance habits.

Money can be saved in different ways, with high-yield savings accounts being a favorite way to save money and see it grow at the same time.

When it comes to savings accounts, many people ask how many savings accounts should they have? Do I put everything in one account, or do I distribute it across multiple accounts?

The short answer is that it depends. It depends on several factors, and what might be the best answer for you might not be the best answer for the next person.

This is because when all is said and done, there are many things that you need to consider – from maintenance fees and APY rates to how easily you can track money and how disciplined you are.

These factors and a number of others all need to be taken into account to make sure that these accounts do more than help you regularly save money.

Benefits of Having Multiple Savings Accounts

Here are the top considerations to keep in mind when it comes to deciding how many savings accounts you should have and how to distribute your money.

It Can Help You Track Your Financial Goals Better

At any given time, we might have multiple savings goals. From buying a new house or carrying out home improvements to buying a new car, growing the vacation fund, or saving some aside money for an emergency, our lives tend to have expenses that require considerable savings. One of the easiest ways to manage all of these savings is to open a separate savings account for each purchase.

By having different accounts for different goals, you will be able to better see how close you are to each goal. It also makes it easier to distribute any money you want to save across your goals, depending on how urgent it is or how much money it needs to happen after living expenses have been accounted for.

It Can Act As A Motivator

Seeing one lump sum might not always make it easy to understand how close you are to each goal. This is especially true if you are saving for multiple things at once.

By having separate accounts for different goals, you’ll be in a better position to assess the progress of each goal and if you need to make some sacrifices come next payday. The power of visualization is known to act as a strong motivator – from money savers to athletes, harnessing the power of visualization can help you stay on track.

You’re Less Likely To Spend Money On The Wrong Things

When you have one lump savings sum for all of your different goals, it can be easier to misspend money on the wrong things. This is because it might not feel like you’re directly affecting any particular goal by taking out money to spend it on something you might not necessarily need.

When you’ve spread your savings over a number of savings accounts, the progress towards each goal becomes somewhat more tangible. It can also make you think twice about extra expenses that can derail you from achieving what you really want.

It Helps You To Prioritize

Prioritizing your goals is important since not all goals might be equally important at any given time. Without clear segregation of funds, it can be difficult to keep track of which money goes where. This can be demotivating, especially if you have multiple financial goals and can keep you from actually moving on to your next goals.

Here, you might also want to consider using money management software as an alternative to maintaining different bank accounts with some versions, including budgets, goals, and several other useful tools.

It Allows You To Diversify

Diversifying is always a smart choice when done strategically. This is especially true since savings accounts come in different kinds of bank accounts. You can save money in a money market account or an IRA account.

A money market account is like a hybrid account that merges a savings account with a checking account. This will allow you easier access to your money. IRA accounts, on the other hand, offer the ability to defer tax payments, which may be lower once you retire.

The important thing here is to plan for the long term. After all, that is what savings are for. Even so, whether it’s a money market account, an IRA account, or anything in between, it’s important to choose the right type of account and bank.

You Can Take Advantage of Multiple Promotions & Bonuses

Many banks, including online banks, offer different bonuses and promotions to attract customers. Such offers will usually be available on different types of accounts, including savings accounts.

Like everything else, offers come in all shapes and sizes. From cash bonuses to higher APY rates and everything in between, these promotions can give you a quick leg up towards your goals. In most cases, it involves opening a new account and meeting certain requirements before the cash is yours.

Typically requirements will include depositing a specified amount of money and holding it there for some time. This makes it perfect for long-term savings as withdrawing the money will mean losing out on the bonus. It can act as a great motivator!

Do take the time to read the terms and conditions of the offer, as well as those for the account you’re opening. This will help you ensure you stay strategic and not end up losing money by spreading yourself too thin.

It Can Help Keep Your Money Safe

Most savings accounts are FDIC insured. Before we go any further, before opening a new account, check if its FDIC insured and take the time to understand what the risks are if it is not.

Most accounts are insured up to the limit imposed by the federal government (up to $250,000). If your savings grow above this amount, any excess is not insured. At this point, it might be wise to move anything over the insured amount to a new savings account so that you keep that money insured.

What To Watch Out For With Multiple Savings Accounts

Watch Out For Maintenance Fees

Many savings accounts have maintenance fees. Usually payable every month, these maintenance fees can put a serious dent in your savings, especially if you have multiple accounts. The good news is that the bank or financial institution with which you have your savings accounts will have a maintenance fee waiver.

To have this fee waived, you will need to meet certain requirements. In most cases, these will set as minimum balance requirements or a minimum monthly transfer from a checking account. If your savings are large enough to meet the required criteria, then it’s all well and good. If they are not, you might want to consider lumping some goals together to ensure you meet the criteria and save yourself some money.

The requirements will vary from one bank to another and, in most cases, will also vary from one type of account to another. Before deciding to distribute your money across multiple accounts, do check if you meet the requirements and, if not, how much it is going to set you back. This will allow you to understand if it’s worth having multiple accounts, and if so, how many.

One thing to keep in mind is that most savings accounts are offered in a tiered structure. Lower tier accounts will have lower requirements but fewer benefits, while higher tier accounts will have higher requirements and more benefits. If you find yourself having to downgrade, first understand what you will be giving up, including the APY rate, which we’ll discuss next.

Watch Out For APY Rates

APY stands for Annual Percentage Yield. It represents the interest rate that you will earn on your savings. Some rates go quite high, and this can give your savings a serious boost, especially if you’re saving money over a longer period of time. The higher the rate, the better it is going to be for you.

Opening a new account with a lower tier than the one you already have means you’re going to lose out on money that you would have otherwise gained from putting that money into your existing account.

Some accounts also offer a higher interest rate, the more money you have saved. This means that it pays (quite literally) to put as much money as you can into that account and enjoy the high-interest rates. After all, the more interest you earn, the faster you’ll reach your goals.

Transfers Can Take Time

If you have multiple accounts and need to move money, do remember that this might not be instant. This is especially true if the accounts are held by different banks or different financial institutions.

Of course, you can always set up automatic transfers if your bank account has this feature. In this case, do make sure that there is enough money available on the day to avoid NSF (insufficient funds) charges as this can put a serious dent in your savings.

FAQs

Is It Better To Have Multiple Savings Accounts?

There are pros and cons to having multiple savings accounts. Since each person’s financial situation, requirements, and goals are different, there’s no one easy answer that works in all circumstances. Having multiple savings accounts certainly has its benefits. It can make it easier to track savings, keeps you motivated, and can help you stay insured. It can also be a great way to diversify. Do keep in mind maintenance fees and APY rates since these usually have some restrictions.

Is There A Limit To How Many Savings Accounts You Can Have?

Each bank will typically have its own policy when it comes to limits on the number of savings accounts you can open. This means that you will need to check with your bank if any restrictions are being imposed on the number of accounts you can hold.

You can also choose to have multiple accounts with different banks if the limit at your bank is too low.

Does Having Multiple Savings Accounts Hurt Your Credit?

Having multiple savings accounts does not hurt your credit. But make sure that they are in good standing, as this will help you avoid complications.

One other thing to watch out for is whether the bank or financial institution does a hard pull credit check or a soft pull credit check. Hard pull credit checks can negatively influence your credit score, but generally speaking, this will not be a big impact.

In this case, be careful about opening multiple accounts over a short period of time. Soft pull credit checks do not affect your credit score.

Should You Have More Than One Savings Account?

When it comes to deciding if you’re better off with a single savings account or multiple ones, do make sure you consider everything. Not only will this allow you to become a better financial planner, but possibly grow your savings faster at the same time.

Remember that different savings accounts can be opened with different banks. Other financial institutions, like credit unions, also offer different types of accounts, including savings. This will allow you to diversify your savings portfolio.

You might also want to think about how to structure your accounts. Not only can you split savings by goals such as emergency savings or retirement savings but also by term, including short-term and long-term goals savings.

It is also important to shop around and think outside of the box. Companies like Ally, American Express, and Capital One generally have good offers.

On the other hand, online savings accounts tend to make the management of accounts easier by providing you with mobile apps and online banking solutions.

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