Why You Need Multiple Savings Accounts

You know putting money aside is a good idea, but while it may seem counterintuitive, putting all that money in one place can make your budget more difficult than it needs to be. To keep things simple, why not create multiple savings accounts and split your savings for specific purposes?

Think of multiple savings accounts as folders

Similar to the old envelope or bucket budgeting system, where you take money and put it in an envelope marked for a specific purpose, this approach works the same way, except that it is digital and automated by your online bank. For example, you might have different categories of savings accounts, for example:

  • Emergency fund
  • Tax fund
  • Vacation fund
  • New Automotive Fund
  • Wedding fund

The idea here is that by looking at all of your savings goals separately, it will be easier to track them. On the other hand, if you only have one savings account, you will only see an amorphous drop of total savings when you see it on your bank’s website, forcing you to track targeted savings somewhere else, such as in a spreadsheet.

In addition, another advantage of splitting accounts is that it is much easier to manage different goals at the same time using automatic payments from your checking account. For example, you can set aside $ 250 a month for six months on vacation and at the same time set aside $ 100 a month for two years to buy a new computer.

Avoid monthly fees when creating multiple savings accounts

Unfortunately, the savings accounts you get from regular banks almost always have a monthly commission (usually $ 5-20) or a high minimum balance. This is why you should stick with online banks, which generally do not charge monthly fees, have a low minimum starting balance, and offer some of the highest annual interest rates on the market. To help you get started with multiple savings accounts, Nerdwallet has a good selection of online banks that you can choose from here .

This article was originally published on July 25, 2017 and was updated on June 10, 2021 with new information and to reflect the Lifehacker style guidelines.

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