5 reasons to have multiple savings accounts

A good savings account keeps your money safe and pays interest, which can help your balance grow over time.

Many consumers assume they only need one savings account to meet their needs, but that isn’t always the case. Having multiple accounts — at the same bank or different banks — can be useful for managing different savings goals, and there’s little harm in doing so, since it doesn’t impact your credit.

“Having multiple accounts can be a way to keep yourself on task with the specific goals you’re saving for, without the risk of funds getting commingled,” says Greg McBride, CFA, Bankrate chief financial analyst.

Spreading your savings across multiple accounts can also help ensure all your deposits are protected under FDIC insurance limits. While about half of Americans have more than one bank account, 68 percent of those with $100,000 or more in savings have multiple accounts, according to market research firm YouGov.

There are several ways that having multiple savings accounts can help make managing your personal finances easier.

Key savings takeaways

1. Track your savings progress

Having one savings account while saving for multiple goals can make it difficult to keep track of priorities.

If your emergency fund and travel fund live in the same account, it can be tempting to raid your emergency savings in exchange for a few extra days at the beach. A single savings account can also make it harder to see how much you’ve set aside for individual goals; targeted savings accounts can put those goals in focus.

Establishing and tracking clear goals has been proven to correlate to higher success for achieving those goals. A study by Psychology Professor Dr. Gail Matthews published by Michigan State University found that 76 percent of participants who wrote down and tracked weekly progress of their goals achieved them. Meanwhile, only 43 percent of those with unwritten goals achieved them.

You might want separate savings accounts for goals such as:

• Buying a car
• Going on a vacation
• Having some cash set aside for emergencies

With a savings account designated for each major goal, it’s easier to monitor spending patterns and achieve those goals. Separate accounts can help create boundaries, too.

“It’s a big red stop sign that says: Do not touch unless it’s for this specific purpose,” says Ryan Frailich, CFP, CSLP, and founder of Deliberate Finances.

Frailich recommends assigning a nickname to each account you open. “If you set up a gift fund for your kids and grandkids, and it says ‘Christmas gifts’ on it, you are a lot less likely to tap that money than you would be if it just said ‘savings account,’” he says.

You might consider putting some of those savings for goals into high-yield savings accounts, which can help supplement the money you put away.

2. Find the best yields

As the Federal Reserve has hiked interest rates over the past year to offset inflation, there have also been significant increases in savings yields. The best savings accounts (many of which are online accounts) are paying over 4 percent annual percentage yield (APY).

One way to make it easier to earn the highest rate is by having multiple accounts open with different banks. That portfolio of accounts can include not only big, traditional banks but also higher-paying online banks. Then, as rates change, money in the accounts can be moved accordingly, to get the best yield on the highest balance. As a short-term investment strategy, having multiple accounts can help you build up your savings faster.

It’s also useful to have short-term savings in a high-yielding account, while you might have long-term savings such as a retirement fund in a CD or IRA account that isn’t earning as much interest.

3. Increase spending awareness

If you have one savings account with a lump of money sitting in it, it’s easy to feel the temptation to spend it. Having all your money in one place also makes it easier to spend because the funds can be moved to a checking account with a single bank transfer.

When your savings balance is split between multiple accounts, the balance won’t appear as one large sum and you can have a better idea of what funds are off limits from spending. That can give you a clearer picture of what your spending and savings priorities are.

Having multiple accounts also adds barriers to spending your money, especially if those accounts are at separate banks. Before you can spend the money, you’ll need to transfer it to a checking account, and that transfer may take a few days to complete if done between separate banks. Adding these additional steps can make it easier to avoid giving in to the desire to spend your savings.

4. Take advantage of available bonuses

One common strategy that banks use to draw in new customers is to offer bonuses to consumers who open new accounts.

Usually, to earn a bonus from a savings account, you need to open an account and maintain a certain balance for a period of time. These bonuses can be worth hundreds of dollars, so they’re worth looking for if you have enough money to set aside.

Opening savings accounts at multiple banks gives you the opportunity to earn more than one of these bonuses, and that bonus money can go toward your savings goals.

If you keep some of your savings in an employer-sponsored 401(k), you also have the opportunity to get bonus savings from employer matches. Employers typically match your retirement savings contributions by 2 to 6 percent of your salary.

Just be sure to read the fine print to see if you’re eligible for a bank bonus. Often, bonuses are only available to new customers with the bank, so you likely wouldn’t be eligible if you already have a checking account with the bank, for example.

5. Keep your money insured

One of the things that makes a savings account one of the best places to store extra cash is insurance from the Federal Deposit Insurance Corp. (FDIC). The FDIC offers up to $250,000 in insurance, per depositor, per account type, at covered banks.

If you have more than $250,000 in your bank accounts, any money over that amount could be at risk if your bank fails. However, splitting your balance between savings accounts at different banks ensures that excess deposits are kept safe, since each bank has its own insurance limit.

For instance, if you have $300,000 in a savings account at one bank, $50,000 of your balance isn’t protected. If you instead put $150,000 into savings accounts at two different banks, your full balance will be insured.

Alternatively, you could keep excess deposits in accounts with different ownership categories. Jointly owned accounts come with an additional $250,000 insured per owner, separate from single accounts.

Finally, you could split your savings between banks and credit unions. Savings accounts at credit unions are insured by the National Credit Union Administration (NCUA) up to the same limits as banks. Credit unions are member-owned and often come with low fees and competitive yields.

What to watch for before opening multiple accounts

It’s important to do research before opening a new account. Just because there’s an attractive yield advertised doesn’t necessarily mean it’s a good fit. In some cases, you might need to meet a minimum balance requirement to get the highest yield, for example. And if your savings balance is split between multiple accounts, it could be harder to meet that minimum.

There are also fees to look out for. Savings accounts sometimes come with a monthly service fee. You may need a minimum balance (or to meet another requirement) to waive that fee, so make sure you can meet the requirements to avoid racking up high costs in fees.

Another fee to consider is an excess transaction fee. Many banks limit withdrawals from savings accounts to six per month, and there’s often a fee if you exceed that limit. That could be a potential risk when having multiple savings accounts, since you may find yourself transferring money frequently between them.

How to manage multiple savings accounts

With more accounts to keep track of, it requires a bit more work to stay on top of how much is where, what each account balance is earning and what fees are being charged.

One way to make things easier is to focus on fee-free accounts, which saves you the stress of having to remember each account’s monthly fees or minimum balance requirements.

A spreadsheet is a useful tool for organizing all of your accounts’ information. Whenever you open a new account, add it to the spreadsheet so you have a single place where you can keep an eye on all your financial accounts.

There are also numerous personal finance apps that can help you track and build your savings. Your own bank’s app might even allow you to link external accounts to it so you can track all of your finances in one place.

How many savings accounts should I have?

In short, the amount of savings accounts that’s right for you depends on your personal finances. Someone with a lot of money may want to open multiple bank accounts to ensure that all of their wealth is federally insured.

Another factor to consider is how many savings goals you have, since you may want to have an account for each major goal or group different types of savings goals into distinct accounts.

But if FDIC insurance limits aren’t a concern, it’s not always necessary to have separate savings accounts for every goal.

“I tend to recommend High Yield Savings Accounts at places like Ally that allow for ‘buckets’ or categorization of savings,” says Jay Zigmont, PhD, CFP, founder of Childfree Wealth.

In that case, you could keep all your goals in one account with separate categories or group savings goals into a couple of accounts.

Finally, it might be worth having additional savings accounts if you’re in a committed relationship.

“If spouses or partners handle finances separately, that might be another reason for multiple savings accounts, shared or individual,” says Tim Melia, CFP, MBA, founder of Seattle-based Embolden Financial Planning.

Some savings goals to consider include:

Frequently asked questions

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  Is it better to have one savings account or multiple?

  How many savings accounts you should have will vary depending on your financial situation. Some factors to consider include what your savings goals are, how much you can earn on yields and whether your savings exceed the $250,000 FDIC insurance limit.

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  How do you build your savings?

  There’s no one way to build up your savings, but a good place to start is by creating and sticking to a budget. A budget will help you keep track of expenses and find areas where you can cut back on spending to save more. Then, you might consider taking small steps to increase your savings contributions over time.

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  How do you manage multiple savings accounts?

  To manage multiple savings accounts, you’ll want to keep track of each account’s balance, yield, fees and earnings. One way to do this is by keeping all of the accounts’ information in a spreadsheet. You could also utilize a personal finance app, or even link external accounts to a bank’s mobile app, to have all the account information in one place.