No one is saving up for just one thing. While you might want to go on a 10-day trip across the Mediterranean, you probably also want to buy a new car one day or to make some major improvements or renovations to your home. You don’t have to pick one. In fact, you probably can’t. We lead full lives, so why would limit yourself to one savings account? It doesn’t make sense. You need savings accounts that work for you.
Here are some reasons why having more than one savings account makes good financial sense:
You have multiple savings goals.
You need to plan to cover or save up for many things throughout your life. Emergency expenses, annual bills, vet expenses, vacations, home improvements, and weddings are among the most common things people save for.
Having multiple savings accounts allows you to set and track specific savings targets. When all of your savings are lumped into one account, it’s hard to separate out your individual goals and get an accurate picture of where you are.
Reaching your savings goals.
If you’ve lumped all of your savings into one account, it’s hard to be certain if you’ve actually met your goal. You might have $10,000 in an account, but do you know how much of that goes toward your emergency fund and how much goes toward your vacation fund? Do you know when you’ve hit your emergency fund goal so you can start saving for that next big thing?
Having the account separate and clearly labeled let’s you see at a moment’s notice how much you have and how much you need to reach your savings goals.
Some Considerations When Opening Multiple Savings Accounts
Not all banks let you have multiple savings accounts. While the major banks haven’t caught on to this trend, credit unions, online and regional banks are allowing customers to open multiple savings accounts. Among those that do are CapitalOne360, Ally, and USAA Bank. Check with your local credit unions to find the best option for you.
Often our clients choose credit unions, online and regional banks because there is no charge to transfer funds between accounts. They can easily move money from their savings to checking for its designated use – be it vet bills, clothing, gifts, or annual reoccurring expenses.
One of the challenges with major banks is the minimum balance requirement. Even if they allow multiple savings accounts, the requirement is too high for many people. Online banks and credit unions often don’t have this restriction, so it gives you more freedom to manage your money is a way that works for you.
If you’re not sure how to get started with creating multiple savings accounts or budgeting, schedule a Power Planning Session today and talk to one of our financial coaches.