If you ask the average person how many savings accounts they need, the answer is likely to be, “one.” That’s a logical answer. After all, barring different interest rates, why would you need more than one savings account to store your money?
Actually, having multiple savings accounts can be very effective. Here are some of the ways you can use them to kick your financial game into overdrive.
Multiple Savings Accounts Can Help You Reach Your Financial Goals
If you have some financial goals in mind, having multiple savings accounts are a good way to measure your progress. After all, it’s hard to tell how much you have saved for a new car when you’re also putting aside money for Christmas gifts in the same account.
If you have a separate account for both a new car and Christmas gifts, on the other hand, you can see how much you have saved for each goal. Even better, you can choose which goals to prioritize. Many financial institutions, like First Alliance Credit Union, allow you to name each of your accounts, making the process even easier.
Multiple Savings Accounts Can Help You Stick To Your Budget
If you get your paycheck by direct deposit, you can usually automate transfers to each different savings account you have. This is especially useful when you use the “envelope” or “bucket” method of budgeting and set up multiple accounts that correspond to each category of your budget.
Multiple Savings Accounts Can Eliminate Overdraft Fees
We’ve all had that sinking feeling in the pit of our stomachs when we realize we’ve overdrawn our account. Even worse are the overdraft fees your financial institution will charge to resolve this matter.
If you keep multiple savings accounts, though, you can designate one of the accounts to be the one you use for electronic payments. Then, before you make an electronic payment, just transfer the funds into that account.
How Many Savings Accounts Do You Need?
If multiple accounts are a great idea, the question that logically follows is "How many savings accounts should I have?"
There’s no one-size-fits-all answer to that question, but there are some good guidelines.
As we mentioned before, if you’re using the “envelope” method of budgeting, you can set up as many savings accounts as you have budget categories.
You can also set up savings accounts for the following items:
- A house down payment fund (or a home repair fund if you already own a house).
- A new car or auto repair fund
- An emergency fund that has at least three months of living expenses
- A vacation fund
- A big purchases fund for items like new appliances
- A tax fund
- A fund for holiday spending, such as Christmas gifts
- A Pet Savings Account to aid with any pet-related expenses
- A WINcentive account to help prioritize your savings
Get Multiple Savings Accounts at First Alliance Credit Union
Having multiple savings accounts is a good money move. It’s a great way to stick to your budget, increase your financial stability and keep track of your financial goals.
If you want to know more what other good money moves you can make, schedule a free consultation with one of our money navigators today. They’ll help you plan out your next moves and help set you on the path to financial success.