10 Reasons to have Multiple Savings Accounts
A solid savings account protects your money and generates interest, allowing your balance to increase over time.
Many consumers believe that they only need one savings account to suit their needs, but this is not entirely true. Having multiple accounts – at the same or other institutions — can help you manage different savings goals, and there’s no danger in doing so because it has no effect on your credit.
“Having numerous accounts can be a way to keep yourself on track with the precise goals you’re saving for,” says Greg McBride, CFA, Bankrate’s senior financial analyst.
Having various savings accounts can help you manage your personal money in a variety of ways.
10 Reasons to have Multiple Savings Accounts :
1. Keep your money insured
One of the things that makes a savings account one of the best places to store extra cash is insurance from the Federal Deposit Insurance Corp. (FDIC). The FDIC offers up to $250,000 in insurance, per depositor, per account type, at covered banks.
If you have more than $250,000 in your bank accounts, any money over that amount could be at risk if your bank fails. However, splitting your balance between savings accounts at different banks keeps your money safe, since each bank has its own insurance limit.
For instance, if you have $300,000 in a savings account at one bank, $50,000 of your balance isn’t protected. If you instead put $150,000 into savings accounts at two different banks, your full balance will be insured.
2. Take advantage of available bonuses
Offering bonuses to customers who create new accounts is a frequent approach used by banks to attract new customers.
To get a bonus from a savings account, you must usually open an account and have a particular amount for a set length of time. These bonuses can be worth hundreds of dollars, so seek for them if you have enough money set away.
Opening savings accounts with various banks allows you to earn more than one of these bonuses. That extra money can be put towards savings goals.
3. Reduce the chance of misspending
If you only have one savings account with a large sum of money in it, it’s easy to fall to the urge to spend it. Having all of the money in one place also makes spending easier because the funds can be transferred to a checking account with a single bank transfer.
One method that having numerous accounts might reduce the likelihood of overspending is to divide the savings balance into categories, allowing you to see how much is actually saved for each objective. The balance will not display as a single enormous figure, making it apparent how much money is available for spending.
4. Find the best yields
As interest rates rise, you may be seeking for which banks are offering the best returns on savings accounts.
Having many accounts open with different banks is one approach to make it easier to earn the highest rate. The money in the accounts can then be transferred proportionately as interest rates change to receive the best yield on the highest sum. Having multiple accounts as a short-term investment plan will help you build up your funds faster.
Look around for the banks with the best savings rates.
5. Track your progress
Having one savings account while saving for various goals can make keeping track of priorities challenging.
If your emergency fund and holiday fund are in the same account, it may be tempting to dip into your emergency savings to spend a few additional days at the beach. A single savings account can also make it difficult to understand how much money you’ve set away for various purposes; specialized savings accounts can help you focus on those goals.
You might, for example, desire separate savings accounts for:
Reasons to have Multiple Savings Accounts
Savings goals you may want to have multiple accounts for
- Emergency fund
- Wedding
- Car
- Home ownership
- Vacation
- College
- Launching a business
- Saving for kids’ futures
- Retirement
