Why You Might Want Multiple Savings Accounts

Ways to Organize Your Cash

person in red and white striped shirt reviewing finances

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You probably know that a savings account is an excellent place to keep money safe. But you don’t have to stick to one account—multiple savings accounts can enhance the way you organize your finances and save for specific goals. There’s no limit to how many savings accounts you should have, but it gets hard to keep track of things after a certain point.

Why Use Multiple Savings Accounts?

You might wonder why you should use more than one account, and we have several suggestions below. Consider these reasons before opening more than one savings account.

Set Money Aside

Set up different savings accounts for specific goals. Moving money out of your primary checking or savings account improves your chances of reaching those goals. You might be tempted to spend money from your checking account if you see a healthy balance. But once the money goes into a sub-savings account, you know it’s earmarked for something specific.

Automate Savings

Set up automatic monthly transfers from your primary account to dedicated savings accounts. That way, you never forget to save for your goals, and you get money in the right place quickly.

Depending on where you keep your savings accounts, you can move money within the same bank instantly, or set up bank-to-bank transfers (which are typically free) to shift funds to a separate bank.

Protect Yourself From Yourself

After you move money into a savings account earmarked for a particular goal, you may experience some “pain” or guilt if you raid that account for luxury items or unnecessary expenses. This behavioral trick helps you stay on track.

Monitor Progress

With multiple savings accounts, you can watch your progress toward various goals. When everything is mixed together, it’s less clear where you stand on specific savings goals. This way, you can label each savings account with a goal in mind and better keep track of your financial plan.

Build Momentum

Success is motivating. If you see an account growing, you have positive reinforcement to continue your saving behavior. Working toward your goals is more enjoyable, and you’re more likely to keep it up.

Hold Yourself Accountable

Your account balance doesn’t lie. If you decide to save money for something but you don’t follow through, it’s critical to understand what’s happening. With another savings account, you will be able to keep better track of your spending. 

You need to be aware of the issue at hand and explore what’s stopping you from making progress. Tracking your habits in several savings accounts will help you get there.

Smooth Your Spending

A dedicated savings account can help you budget for significant annual expenses. For example, if you pay property taxes and homeowners insurance annually instead of using an escrow account, you might want to add to a savings account every month to build up the funds you need. By spreading out the burden of annual costs, you can avoid spending shocks throughout the year.

Yours, Mine, and Ours

If you’ve merged your finances with a spouse or partner—but you both want some autonomy and privacy—it may make sense to open several savings accounts. Each of you might keep an individual account for things you want to spend on guilt-free. Another account might be a shared account for joint goals and expenses. 

Discuss how you want to handle finances, and design a system that feels right for everybody.

Insure Your Savings

If you’re fortunate enough to have significant cash savings, you might open savings accounts at different banks to keep your account balances below FDIC insurance limits. The $250,000 limit is typically per account per institution, so keeping excess amounts at a different institution helps you stay safe (make sure the bank is under separate coverage). That said, it may be possible to have more than $250,000 in one bank—ask a bank staff member for details.

How to Use Multiple Savings Accounts

Now that you understand the benefits of having more than one account, you can better develop a strategy and put the plan into action.

Sub-Savings Accounts

Online banks offer the easiest approach to using more than one savings account. For example, Ally Bank allows you to open an unlimited number of sub-savings accounts in addition to your primary account. Other banks also offer subaccounts, too. Other benefits of online banks often include:

  • No monthly fees, in most cases, which can wipe out any interest you earn or cost you money
  • No account minimums, allowing you to start small
  • Competitive interest rates, helping you grow your savings

Automate as Much as Possible

Electronic transfers ensure that you actually implement your strategy, and they help you avoid temptation too. Life happens, you may get busy, and moving funds to a different savings account might not be at the top of your priority list. To ensure that you keep saving, link your primary checking account to your savings accounts and schedule automatic transfers for each pay period.

You can also ask your employer if it’s possible to split your pay among several different accounts. That way, you won’t need to shuffle funds and clutter up your transaction history.

Open Sub-Savings Accounts for Different Categories

Categorize accounts for what you want to save for, but beware of going overboard. 

It may be beneficial to think of several broad categories as a guideline for how many savings accounts you have. For example, it makes sense to dedicate one account to emergency savings so that you don’t accidentally spend your rainy day fund. In addition, you might open a handful of sub-savings accounts for specific goals. For example, consider separate accounts for:

  • Education expenses
  • Down payment on a house and other home-purchase costs
  • Vacations
  • Weddings or other events

Refine Your Strategy

The nice thing about having several accounts is that you can prioritize your goals. If you don’t have enough money to fund a high-priority goal, you can potentially “borrow” from lower-priority accounts. Diverting funds from other important goals isn’t ideal, but reality occasionally forces you to make tough choices—and it’s nice to have options in those situations.