Can Multiple Savings Accounts Help You Save More?
How many savings accounts are one too many? Can you even keep multiple savings accounts?
Saving your hard-earned money is a prudent strategy for building wealth and attaining a secure financial future. A robust savings challenge offers you a variety of options and flexibility to mitigate any uncertainties of life. A saving culture won’t just come in handy when steering out of the unanticipated hurdles and obstacles in life. Instead, you can put aside a sum of money with a goal in mind or pursuit to enjoy a quality life.
Undoubtedly, having a savings account is a wise step for emergency funding, purchases, and wealth building. However, a significant concern is whether opening several accounts can help optimize your savings strategy.
Read on to garner insightful information on how opening multiple savings accounts might be the missing puzzle to attaining optimal savings goals, or rarely, an ill-judged route.
Can Multiple Savings Accounts Help You Save More?
Although the question might seem basic at first, it can have a lasting impact on your finances. Moreover, it isn’t as straightforward as you might expect, considering we all have disparate financial needs and requirements.
Nevertheless, according to most financial experts and personal experiences, opening multiple savings accounts benefits outweigh the cons and risks. The most significant risk is that as the number of your savings accounts increases, it can be overwhelming to keep track of your finances.
On the other hand, the most remarkable benefit of having multiple savings accounts is that it enhances how you organize your finances and save for specific goals. What’s more, it helps make tracking of your objectives more streamlined. And there is more. But first, it’s best to scrutinize if it’s a fitting model for your finances.
Here is what you need to know:
How Many Savings Accounts Should You Have?
There isn’t a limit to the number of savings accounts an individual should own. Just ensure you can manage all the accounts. Most individuals prefer putting their money for various goals in separate accounts. And yes, it’s a sensible strategy since you can easily track your financial objectives. Therefore, a rule of thumb is to have savings account for each of your financial goals.
Don’t get it wrong. It’s still viable to stick to a single savings account. This is especially true if you find it more manageable when your funds are in one place. In sum, the concern to how many savings accounts you should possess depends on what works best for your lifestyle.
Still, starting small to avoid being overwhelmed would be best if you are a novice at saving money. Always prioritize an emergency savings fund and progressively move to the next for a starting point. Not to forget, saving for several things concurrently might be a setback from making any of them a reality. Most importantly, draw a clear boundary between your emergency fund and other savings accounts, or you might fall into the temptation of borrowing from it.
Benefits of Opening Multiple Savings Accounts
As mentioned above, the most remarkable advantage of owning multiple savings accounts is that it enhances how you organize your finances, making it more streamlining to set aside funds for specific objectives. Other reasons to have multiple savings accounts include:
You can track various saving goals
At a glance, you can see how you are doing with each saving goal. For instance, let’s say you have set money aside for your emergency fund, going on a safari, and acquiring a new car. It will be more streamlining to monitor the progress in each goal, gaining clear visibility into how much you have accumulated to date per goal and how close you are to achieving each objective.
On the contrary, if your emergency and safari fund share the same account, it can be tempting to raid your emergency savings in exchange for a thrilling vacation. Furthermore, a solitary savings account can make it challenging to see how much you’ve set aside for each target.
You Can Capitalize on Higher Interest Rates
First and foremost, not all savings accounts yield returns. For example, it’s almost impractical for current bank account users to enjoy any interest on their balance. Contrastingly, money in a credible Sacco, Money Market Fund, online bank, or a checking account can accrue favourable interests. Still, it’s better to put your money in any account than not have any saved.
Therefore, spreading your money across various interest-yielding savings accounts lets you leverage high-interest rates. In addition, you can receive multiple perks and bonuses from opening an account. Ultimately, the interest and dividends earned can accelerate your progress towards your saving goals.
Keep Your Money Insured
Insurance from the relevant Deposit Insurance Corporation offers protection to your savings account and other bank accounts. Unfortunately, most DICs protect certain limits per depositor, per account type. So, if you deposit an exceeding amount to that limit and your financial institution fails, you could lose the money above the DIC’s limit.
Therefore, it’s sensible for individuals with lump sums to split their funds into various accounts and ensure all their money is insured.
Working towards your goal will be more viable and enjoyable as you watch each account grow every month. Your savings become more tangible when you know you have a certain amount in your emergency fund, safari fund, and new car account. In addition, you will have positive reinforcements to continue your saving strategy if you see each account growing.
Cons of Having Multiple Savings Accounts
Again, several savings accounts aren’t ideal for everyone. Hence, you can still stick to a single saving account if it’s your preferred model. Here are the downsides to distributing your funds in various accounts:
- Multiple accounts can be challenging to monitor. This is especially true if saving money is a relatively new concept, and you are less than perfect at keeping track of your finances.
- Most savings accounts necessitate a minimum balance to earn interest. It can be challenging to meet the minimum balance requirements for many accounts. In addition, if you fail to meet the minimum balance requirement for each of your savings accounts, fees might rack up every month.
Managing Your Multiple Savings Accounts
If you prefer having more than one savings account, it’s paramount to be strategic in approaching the route. For example, you can get a personal finance application that connects all your banks and investment accounts as a starting point. Alternatively, keep a spreadsheet that tracks all your financial statements. Such tools will come in handy in offering a sound understanding of your financial position.
Also, you should prioritize opening fee-free accounts in lieu of minimum balance accounts to save you the hassle of remembering each account’s monthly fees.
Finally, it would be best to automate the process to ensure consistency in your money-saving journey. For instance, set automatic transfers from your primary checking account to your savings accounts for each pay period, or every time you receive a paycheck, allocate a percentage into the savings accounts set up to fund your goals.