I have seven savings accounts, which are a departure from my goal to simplify my financial life.
There are many reasons for having multiple savings accounts. The reasons I believe in are: 1) the prospect of interest rates increasing with one account, 2) a contingency option in case one account freezes, 3) and a second set of wheels to drive.
What I’m saving up for
People often use different accounts because they have different goals. For example, I have:
A reserve fund
A fund for house upkeep
A vacation account
A automobile repair and replacement fund
A savings account for large purchases
A savings account for summer camps and activities for children.
A savings account for a motorhome I intend to buy next year.
Create separate savings goals for each of your savings needs, to track where you are with your financial objectives.
I use a different account to save for each goal, then I set up monthly automated transfers to those accounts to save meticulously.
Why some of my accounts are joint, but others aren’t
Savings accounts help to keep money separated between people who want to make personal purchases. This way, you can buy whatever you want without having to get permission from the other person. Joint savings helps with buying big expensive items and going on vacations.
Learn how to take advantage of the banks
For example, having multiple accounts open at the same time will allow me to take advantage of the different offers that different banks provide.
Utilize reserve accounts and rates that are higher than the FDIC Insurance limits to protect your funds. However, if you want to access your funds, there may be disadvantages.
Creating an account for each of these reasons makes sense for me. For many people, maintaining multiple accounts can be a successful financial move, so you should never assume that having just one account is necessary.