How Many Savings Accounts Should I Have?

Article Summary:

There is no hard and fast rule about how many savings accounts a person should have. That being said, having multiple savings accounts can help you attain your savings goals by managing different accounts for different purposes. However, going overboard with too many savings accounts can lead to unnecessary headaches.

Imagine it! All your life, you’ve dreamed about being able to afford Denver Nuggets season tickets. Yes, they are expensive, but you’ve set a saving goal and stuck with a savings plan. So, with each MVP Nikola Jokić has won, you’ve inched a little bit closer to having those dreamed-of lower-section seats in Ball Arena. However, as each season progresses, you have new items that you’d like to save for.

There is also that Tesla you want to show all your friends how much you care about the environment. And your two daughters keep talking about wanting to see this Japanese hologram called Hatsune Miku, which (who?), although only a hologram, apparently plays concerts in Japan that people obsess over. So, how do you stay strong and steadfast to reach your Denver Nuggets season tickets savings goal while still being able to afford this status-confirming Tesla and those tickets to go to Japan to see a hologram dance and sing?

The easy answer is to make deposits into multiple savings accounts for multiple purposes rather than having just one savings account. Don’t go too crazy with the savings accounts, however, because too many savings accounts can be more trouble than they’re worth.

How to set your savings goals

The first order of business when looking at having multiple savings accounts is to decide what you are saving for and how to prioritize each account. Some people have a whole assortment of things they are saving money for. For them, having a savings account for each item doesn’t really make sense. If you’re in that situation, you need an alternative approach. Well, one good way to be fastidious about your savings while not opening 1,000 accounts is to prioritize a few accounts for different goals. Luckily, each financial institution that you have an account with is insured by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA) for up to $250,000.

For example, you could have three savings accounts with different priority levels. Some will be dedicated to the absolute must-haves, and some can be dedicated to the “could possibly do without.” This is a basic way to get started managing your personal finance goals.

Savings account #1: high priority

This account is for the things that you most definitely need to save for, and you can even refer to it as a dedicated savings account. Funds in this account can be for stuff everyone recognizes as essentials, such as a house or a car. As for things “essential” to you personally, like those Denver Nuggets tickets you’ve been dreaming about all these years, you will probably want to resist saving for them in this account — though it is, ultimately, up to you.

Savings priorities of your high-priority savings account

Here is what savings priorities your high-priority savings account might cover.

Savings account #2: medium priority

These are the things that you would really like but that aren’t essential to your future. This is where those tickets and other “personal essentials” come in.

Savings priorities of your medium-priority savings account

Here are the sorts of savings priorities your medium-priority savings account might cover.

  • Denver Nuggets season tickets
  • Live Hatsune Miku Hologram concert tickets and travel expenses
  • New furniture for your home
  • Future wedding for your soon-to-be engaged child

Savings account #3: low priority

These are the things that are nice to have, but you could really do without them. In short, they are nice, but they don’t really matter to you or your family that much.

Savings priorities of your low-priority savings account

Savings goals you might target with your low-priority savings account could include things like the following.

  • Dining out at least a couple times a month
  • Nintendo Switch gaming system
  • Trampoline for your backyard

How to manage your savings accounts

So, in this example, you have decided to have three different savings accounts with different priorities. Now, the next step is to prioritize and manage your savings, distributing all money you save to the proper accounts. To illustrate, let’s say you are able to save $6,000 a month after all your essential living expenses — rent, transportation, and utility bills — are covered.

Low income doesn’t mean you can’t save

If you have a low income or just a modest one, you won’t have anywhere near $6K a month, $72K a year, to save. In fact, that amount may be well over what you make in a year! Nevertheless, with proper budgeting, you can still save, applying the principles in this (admittedly higher-income) example. Just apply the same percentage to whatever amount you’re able to save every month.

Returning to our hypothetical case where you have $6,000 a month you can put into savings, you might want to do something like this:

How to divvy up your savings

There isn’t a right or wrong way to divvy up your savings, but here is an option that works for many people. Divide your monthly savings based on the priority level of the account. Here’s how it would look if you had $6,000 to save every month.

  1. High-priority account: 60% or $3,600.
  2. Medium-priority account: 30% or $1,800.
  3. Low-priority account: 10% or $600.

This is a great way to save, diversify your savings, and make sure you are contributing more money to the savings goals that you prioritize most.

Pro tip: differing priorities will mean different savings plans

This is just an example. Different individuals will have different things that they prioritize. If you are a foodie, for example, you might want to move the dining out from low priority to medium priority. An avid Nuggets fan might even opt to move those Nuggets season tickets into the highest priority. While putting these tickets in the same savings category as your emergency fund will strike some as insane (be ready to get criticized), the bottom line is that this is your money. We are all our own person, and we each must set our own priorities.

In the interest of peaceful coexistence, try not to be too harsh with the busybodies sure to get on your case when you prioritize differently than they would.

Be careful of too many accounts!

You could theoretically have 100 different savings accounts at multiple different banks, but in practice, this can be much more trouble than it’s worth. Having way too many accounts is like having way too many pets: they are difficult to keep track of! Understanding all the fees, rules, and regulations for every account in every bank will be almost impossible.

In addition, different banks may charge you different fees for exceeding their monthly savings account transaction limits or not meeting their minimum monthly balance limits. Best to stick to a number around five or under — max. Otherwise, you could be losing money and not even realize it.

Different type of savings accounts to consider

Most people who have a bank account will have a checking account and a savings account. However, savings accounts are not cookie-cutter replications of each other. Some of the types of accounts that are available and you might want to look into are the following:

Pro tip: don’t pay more taxes on savings than you have to

Though interest on savings is taxable, there are ways to mitigate the damage. Learn more by reading this SuperMoney article.

For high-priority, long-term savings, consider CDs

A great way to save money while having minimal risk and earning interest is to invest in Certificate of Deposit accounts or CDs. These lock your money up for a period of time, but the interest is generally better than what you would receive with a traditional savings account, share savings account, or money market account. For those long-term, high-priority savings goals like a house down payment, consider locking up a portion in a CD if the savings and purchase timeline works.

FAQ

Does it cost money to have multiple savings accounts?

In general, no, but it can cost money if your bank has rules like minimum balance requirements that must be met on a monthly basis.

Can you open multiple savings accounts at the same bank?

Yes, you can have multiple bank accounts, including multiple savings accounts, at the same bank.

How many bank accounts do millionaires have?

Some millionaires have multiple accounts; some just have one. The boxer Floyd Mayweather, for instance, was famous for only having one savings account with $123 million in it.

How many savings accounts can I have at one bank?

There are typically minimal restrictions, if any, to opening multiple savings accounts at one bank. However, each bank is different, and you might want to check with the bank.

How many and what type of savings accounts should I have?

You should have separate savings accounts if you have multiple savings goals. However, this is not a hard and fast rule. Opening multiple accounts with different priorities for each can help streamline your savings plans. You should also not keep more in any one account than the $250,000 that FDIC or NCUA insurance covers, Floyd Mayweather’s example notwithstanding (unless you have made special arrangements to insure higher balances). You should also make sure that the total amount you have in accounts at a single financial institution does not compromise your insurance coverage.

As for types of accounts, you should choose those that maximize your interest earnings without giving you less access to your money than you need. For those longer-term savings goals, you probably want high-yield or high-interest money market accounts and might even consider a CD.

Key takeaways

  • Although there is no hard and fast rule regarding how many savings accounts you should have, having multiple accounts can help you meet your savings and financial goals in a more calculated way.
  • One way to save is to calculate how much you save each month and then distribute it to different savings accounts based on priority.
  • Having too many savings accounts is like having too many pets! It’s hard to keep track of them, so have a limit. Having five or fewer accounts is reasonable.
  • There are multiple savings accounts to choose from, and you might even want to consider CDs.
View Article Sources
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    Should your set of savings account include one for each of your children? Read this scholarly overview of potential benefits to help you decide.
  2. Deposit Insurance — FDIC
  3. Floyd Mayweather Jr. Keeps His Money In One Bank Account With $123 Million In It — Business Insider
  4. Opening a Bank Account — Federal Trade Commission
  5. Rules and Regulations — NCUA
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  15. Compare Savings Account Interest Rates — SuperMoney
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  17. How Much Money Should I Save Before Moving Out? — SuperMoney
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  19. How to Budget Money on a Low Income — SuperMoney
  20. Should I Open a Savings Account and Why? — SuperMoney
  21. What Is A Share Savings Account? — SuperMoney
  22. What Is a Sweep Account and How Does It Work? — SuperMoney