In times like these, having even one savings account — with a positive balance, no less — is a financial victory. But is a single savings account really enough to set yourself up for financial success?
One savings account represents the bare minimum you need to shore up your finances. To go above and beyond, you should consider opening an account for every unique savings goal you have — even if it’s just to splurge on a new pair of sneakers.
Here are the many reasons why you should adopt a multi-account approach to your savings.
1. It’s Free
Most basic accounts (and even some high-yield savings) don’t come with added costs. They’re free to open and manage, many without balance minimums or limitations on withdrawals.
In other words, there’s no harm in having multiple accounts attached to your name.
2. You Can Tap into Different Perks
No rule says you have to keep all your savings with the same bank. You can shop around to find the best fit.
Many banks offer sign-on perks to new customers, such as monetary welcome bonuses or promotional interest rates. By spreading your accounts across multiple banks, you can capitalize on as many freebies as possible.
3. You Can Protect Your Emergency Fund
When one account has multiple jobs to do for your finances, it’s easy to overwork your savings. Let’s say you have one account that serves as your emergency, vacation, and “just for the heck of it” fund.
With all these goals comingling, you can lose track of what you’re saving for — or how much you need for each goal. Before you know it, you can take funds reserved for an emergency and use them on a weekend getaway.
If you’re unlucky, your next emergency may arrive before you can repay these savings. In this uncomfortable situation, you have the option of using your line of credit as a stopgap. It serves as a safety net any time your savings fall short of what you need.
If you don’t have a line of credit already, you can visit Fora Credit to find out what you need to apply. But it’s easier to side-step this issue altogether by separating your goals into separate accounts. This way, you’re less likely to use your emergency fund on non-emergencies.
4. It Gives Purpose to Your Spending
Savings isn’t just for high-priority financial tasks, like emergencies, buying a home, or retiring. It can help you work towards any purchase that exceeds the month’s expendable cash. That includes unnecessary frills like designer bags or sneakers, as well as experiences such as classes, excursions, and gifts.
This way of thinking encourages you to commit to something you want to achieve in the future rather than using your expendable cash on random things that don’t matter.
5. Some Accounts Earn Better Interest Rates
All savings accounts automatically accrue interest over the course of the year, based on your balance. But not all accounts are created equal. While most basic accounts offer paltry savings rates, high-yield savings accounts promise better returns.
These funds come with higher interest rates, sometimes ten times what you normally earn. This extra interest can help give you a little boost without any effort on your part.
The Takeaway:
If one account is good, several are better. With zero cost and a lot of accountability, multiple savings accounts help you keep track of your money better.
