So, how many savings accounts should you have?
This is one of the most asked questions in the world of personal finance. But, unfortunately, almost everyone deals with this dilemma when it comes to opening a new savings account.
Opting in for multiple savings account depends totally upon one’s personal choice, income and goals.
To help you out, we have curated this definitive guide on how many savings accounts you will need to manage your finances.
- What Is A Savings Account?
- How Many Savings Accounts Should I Have?
- 5 Advantages Of Having Multiple Savings Accounts
- 3 Things To Watch Out Before Opening Multiple Accounts
- How To Manage Multiple Savings Bank Accounts?
What Is A Savings Account?
Savings accounts, as the name suggests, help you save money.
They are one of the best government-backed financial institutions that help people to park their money. In return, people get safety and interest on their parked money.
This way, your money stays safe in the bank and accrues interest, which further helps grow your wealth.
How Many Savings Accounts Should I Have?
There are no limits on having minimum or maximum savings accounts. You can prefer opening multiple savings accounts as per your choice and needs.
To know how many savings account you need, consider this example:
There are 3 types of individuals in this world.
First, those who don’t have much time to manage their finances. Hence, they prefer single savings account for themselves.
Second, those who open multiple savings accounts to earn more interest. So, they open an account in each bank which offers them a higher interest rate.
Third, those who link their financial goals with their savings accounts. For example, they’ll open a new account for their vacation goal, a new account for child’s education goal, etc.
So, it’s an individual choice on the number of savings accounts they actually need.
5 Advantages Of Having Multiple Savings Accounts
You might be thinking that you are good with only a single savings account. However, here we have listed down a few advantages of having multiple savings accounts.
According to Greg McBride, Bankrate chief financial analyst, “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,.”
1. Link Different Accounts To Different Goals
The major benefit of having multiple savings accounts is to link your different financial goals with them.
Think of it this way. You have few financial goals, and you find it hard to track their progress. In this situation, having multiple savings accounts can help you easily track your financial goals.
For example, You can create different accounts for the following categories:
- Emergency Funds
- For Annual Vacations
- Buying a home/property
Having a different account for each goal, You can know exactly how much your bank has and how much more you need to reach your target.
Having single savings account for emergency funds and vacations will make it hard for you to dedicate a specific amount to each goal. You might end up using your emergency funds in your vacations.
2. Stay Motivated To Save More
If you always find it hard to save more money towards your financial goals, opening multiple accounts can greatly help you.
Having a designated savings account for each goal will help you understand exactly how much you want to save. This will motivate you to save more in the priority account first, for example, the emergency fund account.
It will be easier for you to see which account needs more attention than other accounts, and you’ll stay motivated to grow that priority account.
3. Avoid Over-Spending Temptations
You might have heard of people who won lotteries at one point in time and ended up losing all of their money in a matter of just a few years. Do you know why this happens?
This is because of the spending temptations they have while seeing a huge sum of money in their bank accounts. So they end up overspending and usually lefts with nothing.
When you have a single savings account, it reaches a huge surplus balance after working for some healthy years. And, when you see that much amount in your bank, you usually misspend or overspend your hard-earned wealth.
If you open multiple savings accounts, each of your bank accounts will have a lower balance. As a result, it gets harder for you to think about overspending, and you’ll be rightly managing your finances.
4. Grab Bank Offers With Multiple Accounts
Once you’ve decided that you will open multiple savings accounts for yourself, there are chances that you’ll end up getting some good offers from the banks.
Many banks offer great bonuses and reward points to the customers to open a new account in their banks. Just keep an eye on the bank offers, and you can take advantage of their rewarding deals.
These bonuses can be worth anywhere around hundreds of dollars. You can use these extra bucks to fuel your financial goals.
5. Enjoy Varying Bank Interest Rates And Benefits
In this competitive financial world, every bank offers different interest rates. So by having different savings accounts, you can enjoy competitive interest rates and perks offered by the different banks.
Also, some banks offer lower international transaction charges as compared to other banks. In addition, some offer good loan facilities, lower EMI interest rates, advanced facilities, etc.
If you’re a deal seeker, having multiple savings accounts can prove to be very beneficial for you.
3 Things To Watch Out Before Opening Multiple Accounts
Like everything, there is a downside of having multiple savings accounts as well. Therefore, you should always watch out for the following 3 factors before you make up your mind to open multiple accounts for yourself.
Keep An Eye On The Maintenance Fees
You should always look out for the monthly or annual maintenance fees while opening a new savings account. With having multiple savings accounts, you might be in a state where you have to pay maintenance charges which can cause a huge dent in your savings.
Many banks also offer a fee waiver if you meet certain requirements. However, you must consult with the bank managers in order to get fee waivers or lower down your maintenance charges.
Target For High APY Interest Rates
APY means Annual Percentage Yield.
In simple words, it means the percentage of interest you will receive on your savings on an annual basis.
You should always target higher APY interest rates when you hunt to open new savings account for yourself. Some banks can offer huge interest rates, which can surely boost your financial wealth.
Look Out For Liquidity
This is one of the most important factors when you consider opening new savings account for yourself.
Liquidity means how easily you can withdraw your cash from the bank account. All banks have different policies and terms when it comes to withdrawing your money.
You might not want to be stuck in a scenario when you need money on an instant basis, and your bank says the withdrawals take a minimum of 48 hours.
How To Manage Multiple Savings Bank Accounts?
Well, having more than one savings account can be complicated for many people. They find it hard to manage multiple accounts.
To keep track of all your accounts nicely, look out for some proven ways:
- Always opt for fees-free savings accounts. You don’t want to end up paying annual maintenance charges or some other hidden brokerage charges.
- Stay aware of the minimum balance threshold of your bank. Many banks start deducting penalty charges if your account has a lower balance than the minimum threshold.
- Use spreadsheets, finance apps like Mint to easily check every single transaction on your bank accounts.
By using the above methods, you can be sure about all your banks, and it will be easier for you to keep an eye on all your savings accounts at once.
There is no magic number on the minimum or maximum of savings accounts you can have. It all depends on an individual’s choices, earnings, financial goals, and how they spend their money.
If you’re good at managing your finances, then you should opt for opening multiple savings accounts and linking them to your financial goals. On the other hand, if you find it hard to manage your finances, you’re also good for a single savings account.
Just make sure you avail the best benefits and offers while you opt-in to open a new savings bank account for yourself.
Disclaimer: This article is completely informational and educational and is not meant to constitute legal, tax, or investment advice. You should always consult with qualified financial experts and tax professionals regarding your specific situation. Keep in mind that investing contains equal risks and rewards. The value of your assets will fluctuate, and you may gain or lose money over time.