How Many Savings Accounts Should I Have

January 17, 2020 | Mission Fed

Couple reviewing their checking and savings accounts.

Managing finances can become more complicated as you get older and acquire more ‘stuff’ and responsibilities, including taking care of other people. What’s more, this often comes without much guidance or financial planning. Many times people are left wondering, “How many savings accounts should I have?”

Unfortunately, there isn’t a one-size-fits-all financial guidebook for every bank. However, the article below outlines what you should know when thinking about opening savings accounts for different financial situations.

Who Needs a Savings Account?

Everyone needs at least two bank accounts: a checking account and a savings account. It is very easy to continually withdraw money from one account e.g a checking account, however having an additional savings account can help you specifically save money in that account; spending money from a separate checking account could help you save in the long term. A savings account could also prevent you from suddenly falling into debt.

The Federal Reserve Board reported that 44% of adults do not have an emergency fund to cover a situation costing over $400. That’s car trouble, a broken ankle, or losing a job for a month. When you open a savings account, you can restrict your spending and be somewhat prepared in the event of an unforeseen circumstance — from a small incidental to a life-altering event.

Why You Should Have Multiple Bank Accounts

Splitting savings can help deter irresponsible spending. Laura Scharr-Bykowsky, a financial planner talks about the importance of ‘mental accounting’ (a behavioral economics phenomenon). According to Laura, people tend to stop spending once an account is depleted. So, having separate savings accounts can help you stop dipping into accounts for other expenses.

Having multiple savings accounts may be an optimal strategy for the following reasons:

  • Insure Your Money – The National Credit Union Administration (NCUA) provides members with $250,000 coverage for single ownership accounts. If you have a high balance that exceeds the maximum, then it might be wise to visit your financial institution to review coverage options available to your specific situation.
  • Help Budget – Some accounts can have a limit on the number of withdrawals you can make within a time period. This type of account could help prevent you from dipping into your savings and avoid incurring costly monthly fees. If you can only transfer funds out of your savings account so many times in a month, you’re less likely to do so on impulse and more likely to leave your money in savings.
  • Manage Several Goals – It can be challenging to keep track of savings with one lump sum, especially if you have several financial goals. It can become quite complicated to keep tabs on withdrawals and direct deposits when you have diverse financial goals but only a single bank account.
  • Encourages Saving – Having separate savings accounts can help you clearly track how much you need to save and can be a great way to motivate you to meet your financial goals.
  • Take Advantage of Several Perks – Appreciate the higher dividend rates of one financial institution, the number of ATMs for another, or bonuses for opening accounts? Receive the rewards you want by owning several savings accounts.

Reasons Why You Shouldn’t Have Multiple Bank Accounts

The most apparent reason why you shouldn’t have numerous savings accounts is that it can become quite complicated. For most people, having one or two savings accounts in addition to their checking account is optimal. But if, for instance, you have six different savings accounts, it could be hindering your goals. If you open a savings account, it should only be helping you to save. A good indicator that you have too many is that it becomes overly time-consuming to keep track of all your personal finance records.

An excessive number of savings accounts could lead you to:

  • Fail to detect fraudulent activity, or processing errors
  • Accidentally incur a penalty for falling below the minimum balance
  • Pay an excessive number of monthly maintenance fees
  • Overlook potential savings through a high-dividend savings account

What Type of Savings Account Should I Have?

The type of savings accounts you should open depends on how you intend to use the funds. Beyond the regular savings account, which is easily accessible, there are a few options:

  • High-yield accounts offer a higher dividend rate than a regular savings account because they require a larger initial deposit. Federal regulation restricts certain withdrawals and electronic transfers to six per month. Find out more by speaking with your financial institution.
  • Money Market dividend rates are generally higher than a regular savings account. They often require minimum balances and may assess fees when minimum amounts are not met. Federal regulation also restricts certain withdrawals and electronic transfers to six per month so speak with your financial institution to learn more.
  • Certificate Accounts requires a single, large deposit that continually accrues dividends. The point is to leave it to grow for a specified amount of time. The restrictions on withdrawal are more severe than for money market accounts. This option is optimal for long-term savings goals like retirement.

To help inform your decision, find out How Much Interest Do Savings Accounts Earn.

Start Saving Money

Particularly when it comes to finances, it’s better to be safe than sorry. Here are some tips to help you start saving money:

  • Use automatic savings to save consistently. If possible, set an amount to be transferred on payday, or a specific day of the month.
  • Try to find institutions without minimum balance fees.
  • Name your savings account to keep your goals in sight easily.
  • Don’t forget to contribute to long-term savings goals and not just short-term goals.
  • Consider a credit union over a traditional bank for better rates.

While life may be a balancing act, it shouldn’t become a juggling act. Don’t over-complicate your personal finance goals with too many savings accounts, but do set up a few to help you properly manage your wealth. Unsure how many bank accounts are right for you? The experts at Mission Fed are always happy to provide answers and chat about your situation.

The content provided is intended for informational purposes. Mission Federal Credit Union disclaims any liability for decisions you make based on the information provided. References to any specific commercial products, processes, or services, or the use of any trade, firm, or corporation name in this article does not constitute endorsement, control or warranty by Mission Federal Credit Union.


Money Crashers. 7 Reasons to Have Multiple Bank Savings Accounts — Pros & Cons.

Nerd Wallet. Need Multiple Savings Accounts? Here’s Where to Bank.

The Penny Hoarder. When Hoarding Your Pennies, How Many Savings Accounts Should You Have?

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