How Many Savings Accounts Should You Have? | Banking Advice
Key Takeaways
- There’s no limit to how many savings accounts you can have.
- Having just one savings account can simplify money management.
- Having multiple savings accounts may let you easily stash cash for different goals.
How many savings accounts you should have depends on your financial goals and money management skills. You might want to keep all of your savings in one easy-to-monitor account, or you may prefer to scatter your savings across several accounts so you can assign a spending “bucket” or “vault” to each account.
Is There a Maximum Number of Savings Accounts?
There’s no limit to the number of savings accounts you can open, either at one bank or several banks. But is there an ideal number of savings accounts? Not really. However, you don’t want to get too carried away and open so many savings accounts that you lose track of balances, interest rates and other account details.
“There is no right or wrong number of savings accounts,” says Kendall Meade, a certified financial planner and senior financial planner at SoFi. “Some people prefer to separate their savings into multiple accounts for different purposes, while others find it simpler to have all of their money in one account.”
Jay Zigmont, a certified financial planner and founder of the firm Childfree Wealth, says he leans toward maintaining one savings account where he can earmark money for a variety of purposes, such as an emergency fund and a travel fund.
“For many people, one high-yield savings account can do it all,” Zigmont says. “More accounts does not necessarily mean you are better off or more diversified.”
However, some savers might want to open several accounts and dedicate each one to a different purpose, such one for setting aside money to make a down payment on a house and another for emergency spending.
Pay Attention to Insurance Coverage Limits
Meade and Zigmont emphasize paying attention to insurance coverage limits when you’re setting up or maintaining a savings account. Both the FDIC and the NCUA insure deposits up to at least $250,000 per depositor, per insured financial institution, per ownership category.
So, if you stash too much cash in one savings account, your balance might not be fully insured if your financial institution closes.
Should You Keep Your Savings at One Bank or Different Banks?
As with the number of savings accounts you should have, there’s no right or wrong answer regarding whether you should keep your savings at one bank or different banks.
Meade believes it’s fine to keep all of your savings in one account at a single bank or credit union, as long as all of your money is insured. But if your balance exceeds the coverage limits, you might consider establishing two or more savings accounts at one bank or several banks.
If you’ve already got a relationship with more than one financial institution – a checking account at one and a mortgage at another, for example – it might make sense to set up a savings account at each place. This way, you can take advantage of the relationship perks each financial institution offers. You also can more easily transfer money if, say, you need to shift some of your savings toward a mortgage payment.
Some banks offer bonuses for opening a new savings account and keeping the account open with a certain amount of funds for a certain amount of time. Look for accounts that also offer competitive APYs.
Regardless of how many savings accounts you settle on, look for accounts with high annual percentage yields and low or no fees. And before depositing money at a bank or credit union, double-check that it’s FDIC- or NCUA-insured.
How Do You Manage More Than One Savings Account?
To manage more than one savings account, label each one to reflect its purpose.
Almost every bank’s online platform or app will allow you to rename an account to a nickname you prefer. Make sure that you clearly identify what each savings account is used for.
That’s the easy part. The hard part: Being disciplined enough to properly manage multiple savings accounts. To make it easier, Meade suggests:
- Using a tool to track accounts. Meade says various digital tools (such as SoFi Coach, Quicken Simplifi and YNAB) let you link savings, checking, investment and loan accounts so you can gain a broad, one-stop view of your finances.
- Automating deposits into each account. In addition to automating deposits, you should be as consistent as possible with the dollar amounts of automated deposits.
- Resisting the urge to dip into different accounts for different needs. For example, try not to touch an emergency fund to come up with cash for an upcoming vacation.
- Staying on top of your financial goals. If your goals change, you might want to adjust how much money is going into each account – and how often.
- Rethinking your contributions. You might decide, based on your evolving financial goals, to trim your savings allocations so you can put money into a certificate of deposit or invest in an exchange-traded fund.
What Are the Pros and Cons of Having Multiple Savings Accounts?
Pros
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Setting aside money for different purposes. Setting up multiple savings accounts to meet specific goals – such as one account for building an emergency fund and another account for stashing money for vacations – may make it easier to achieve your financial goals.
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Boosting insurance coverage. If your savings account balance at one financial institution goes over FDIC or NCUA coverage limits, establishing accounts at other financial institutions may help you protect your money.
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Earning more bonuses. If you set up savings accounts at several financial institutions, you might reap an account-opening bonus (typically in the form of cash) from each bank or credit union.
Cons
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Tracking the accounts. You may find that monitoring multiple accounts turns into a juggling act.
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Potentially racking up more fees. Some accounts may be fee-free, while others might charge monthly fees, overdraft fees, ATM fees and other fees.
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Maintaining minimum balance requirements. Different financial institutions might impose different minimum balance requirements in order to earn a certain interest rate or even keep an account open.
