How Many Savings Accounts Should You Have?

There's no one-size-fits-all answer to how many savings accounts you should have. The decision is entirely personal and should be based on your unique savings needs and goals, as well as your ability to maintain a minimum balance in each account.

Typically, there's no maximum number of accounts you can have — although an individual bank may limit how many accounts a single customer can open. 

Still, there are considerations when deciding to open more than one savings account. This article will delve into these key considerations and offer tips for making the most of multiple savings accounts.

How Many Savings Accounts Should I Have?

One savings account may be sufficient if you're new to saving or don't have much extra income to tuck away. With a savings account, you can earn interest on money that's not needed for everyday expenses. You  may even earn a higher interest rate with a high-yield savings account. Most savings accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to the amount allowed, meaning your funds will be protected in the unlikely event of a bank failure.

However, if you're ready to get serious about personal finance, having multiple savings accounts may be helpful. 

Many people decide to open more than one savings account, with each account earmarked for a specific goal. For example, you may want to save money in one account for a home down payment and in another account for a planned vacation overseas.

Dedicate at Least One Savings Account for an Emergency Fund

If opening more than one savings account, at least one account should be used for an emergency fund. Emergency funds contain money that can be used to cover an unplanned expense, such as a hefty medical bill or a necessary car repair. 

By keeping an emergency fund, you won't have to use a credit card or take out a high-interest personal loan when an unexpected expense arises. An emergency fund  may also keep your household from bankruptcy in case of a job loss. 

How much money should go into an emergency fund savings account is a personal choice. However, a good rule of thumb is to keep at least a few months' worth of living expenses — such as rent/mortgage, utility bills, food costs, transportation costs, etc. — tucked away. 

By keeping an emergency fund in a dedicated savings account, you'll be less tempted to spend the money on anything other than an unplanned necessary expense.

Other Uses for Additional Savings Accounts

In addition to a dedicated emergency fund, here are some other goals that you may want to open a separate savings account for:

• A major vacation
• A major home improvement project or new appliances
• A down payment on a home
• A car purchase
• Holiday spending, such as gifts, party clothes, etc.
• A wedding or other large celebration
•  Starting your own business

Can You Open More Than One Savings Account at the Same Bank?

The decision to have more than one savings account at the same bank is completely up to you. Keeping all accounts at the same bank can make it easier to manage your finances. If you receive a paycheck via direct deposit in the checking account, it  may be possible to set up recurring automatic transfers of some of the funds to your savings accounts. You can also keep tabs on all of the savings accounts simultaneously through the same bank's mobile app.

However, there may also be reasons why you may want to spread your savings across several different banks. Because the FDIC limits the amount of money covered per account type per bank, it may be wise to spread large amounts of savings over several banks to ensure all the funds are insured.

Opening a savings account at another bank may also be worthwhile if it offers perks that your current bank doesn't. For example, you may find a savings account at a new bank offering a higher interest rate than the current one. Some institutions may also offer attractive incentives such as cash bonuses for opening a new account.

Depending on the bank, you may be limited to the number of accounts you can open. Be sure to check with the bank when considering an additional savings account.

The Pros of Having Multiple Savings Accounts

Here are some of the reasons why having more than one savings account may be a good idea:

• Keep your savings separate: Having more than one account allows you to keep funds intended for a particular use separate. When you do this, there's a lower risk of using funds for another purpose. For example, you may be less tempted to dip into funds being saved for a home down payment to pay for a vacation instead. This will help keep you on target for important savings goals.
• More motivation for a savings habit: If you're saving money for a particular goal, seeing the account balance grow toward the goal you have set can be rewarding. You may be more likely to feel motivated to save more than if all of the savings were going into one catch-all account.
• Spread out FDIC coverage: If your total savings is higher than the FDIC's coverage maximum, having several accounts at several different FDIC-insured banks  may help protect all of your money.
• Take advantage of higher rates and bonuses: By opening a new savings account for a new goal, you may be able to take advantage of offers of higher interest rates or other incentives.

The Cons of Having Multiple Savings Accounts

Having multiple savings accounts may not be an ideal solution for everyone. Here are a couple of considerations worth keeping in mind:

• Minimum balance requirements: Some savings accounts may require you to keep a certain amount of funds in the account at all times, or they may charge a monthly fee or pay a lower interest rate. Having more than one savings account for separate goals may make it harder to reach the required minimum.
• Requires management skills: Having more than one savings account requires the ability to keep tabs on multiple accounts, which is no easy feat. This is especially true if you need to memorize multiple logins and passwords to access separate accounts. However, managing multiple accounts  may be more manageable if they're all at the same bank and can be accessed through the same mobile app dashboard.

Tips for Maintaining Multiple Savings Accounts Effectively

Here are some ideas for getting the most out of more than one savings account and making managing multiple accounts easier.

Label Your Accounts

Many banks may allow users to assign each account a nickname. Labeling accounts makes it easier to ensure that the right funds are going toward the right savings goal. For example, you could name one savings account "Emergency Fund" and another "New Car." This would help prevent you from accidentally withdrawing emergency fund money for another purpose.

Automate Your Savings

Many banks may allow you to set up automatic transfers from a checking account to a savings account. By setting up an automatic transfer of a specific amount of money on a specific schedule, you won't have to take the time to manually complete multiple transactions every month. You also will be less likely to forget or intentionally skip saving.

Make Your Emergency Fund a Priority

By prioritizing an emergency fund, you're less likely to be negatively impacted by an unplanned financial emergency. It's worth depositing the majority of your savings money into an emergency fund account until there is enough saved up to cover a few months of regular living expenses. After that, you may want to continue adding a smaller amount while focusing on other savings goals.

Save Your Windfall Money

Not all financial surprises are negative. If you receive a windfall in the form of a work bonus, an inheritance, a lottery prize, or any other type of unexpected gain, consider putting it in one savings account or spreading it among several. It can help you meet savings goals sooner.

Explore Different Account Types for Saving

Aside from traditional accounts, there are other savings account types worth exploring. You can even mix and match different account types that best suit different savings needs.

• High-yield savings account: High-yield savings accounts tend to pay higher interest rates than traditional savings accounts. However, not all banks offer them, and they may not be available in all regions.
• Certificates of deposit (CDs): Certificates of deposit are accounts in which you deposit money until a specified maturity date. In return, CDs tend to pay higher interest rates than traditional savings accounts. However, if you withdraw funds from a CD before the maturity date, you may lose some or all of the interest earnings.
• Money market accounts: Money market accounts typically offer higher interest payouts than traditional savings accounts. However, money market accounts often come with higher-than-normal minimum balance requirements.

Final Thoughts

Ultimately, there's no one answer to the question "How many savings accounts should I have?" Everyone has different savings and financial needs. 

That said, having multiple savings accounts can be beneficial depending on your ability to save, financial goals, and time horizon. More than one account can help you stay organized and motivated — ultimately helping to reach your savings goals faster.