7 Reasons Why You Should Own Multiple Savings Accounts
In this article you will learn about 7 reasons why you should have multiple savings accounts.
Boost your financial goals using multiple savings accounts to your advantage
If you’re new to investments, you have probably heard that you should have multiple savings accounts, but do you know the reason?
Maybe you have read it in a personal finance book or heard a finance expert say it. Maybe it was that cousin of yours who has recently started investing.
If you are thinking about your savings, you have probably heard that you should not put all your eggs in one basket.
This is a small piece of financial wisdom that serves to warn us that putting all of our resources in a single place can be a bad idea.
What if you accidentally drop that basket? What if somebody kicks it? You better have multiple savings accounts to avoid any problems.
When it comes to savings accounts, most of us think about a safe place to put our money. Savings accounts are, indeed, low-risk deposit accounts.
They are an excellent way to build an emergency fund and boost your savings to reach your financial goals. These accounts serve as funds for banks to run their lending operations.
The way this works is the bank uses your money as part of their reserves to make investments and provide loans. In exchange for you allowing them to do that, they will pay you interest.
This process helps to keep your money safe at a bank or credit union, which the federal government insures. Plus, it makes your money grow.
The FDIC (Federal Deposit Insurance Corporation) insures savings accounts against losses. The condition for that is that the account holder opens the account through a bank.
Alternatively, if you open an account in a credit union with up to $250,000 in it, the National Credit Union Administration also ensures it.
However, if you keep all your money in one account, you are overlooking a number of reasons to have multiple savings accounts. Here are 7 of them.
1. Some accounts offer bonuses. Use them to your advantage.
Bonuses can be an excellent way for you to boost your savings by adding some extra money to the stash. The more you can take advantage of those, the better. Bonuses can be as high as $500.
In order to get the bonus, however, there may be a few conditions you have to meet. These conditions may include things such as making direct deposit minimums to maintain a certain monthly balance.
You will be redirected to another website
2. Save for different purposes and track your progress towards them.
Using separate accounts for different goals helps you get a clear picture of how close or how far you are to reaching your different financial goals.
For example, you might want to save for a trip and for buying a car. If you put the money for both goals in the same account, how will you know how much you have for each?
Not to mention there may be a big price discrepancy between the price of the car and the price of the trip.
So this is the reason to use multiple savings accounts as different batches where you save for different goals.
3. Maximize your yields with multiple savings accounts
As you may or may not know, interest rates are on the rise, and so is inflation. In times like these, finding savings accounts that offer higher yields is paramount to grow your savings.
Most banks or credit unions already offer the security, variety of services and access you need. Your mission now is to find the ones with the highest yielding savings accounts.
4. Make sure your money is insured
During the Great Depression in the 1930s, the failure of banks prompted the then president Franklin D. Roosevelt to establish a policy for backing banks as part of the New Deal.
Nowadays, thanks to this policy, deposit accounts at banks and credit unions are subject to overwatch and backing by important organizations such as the FDIC and the NCUA.
These organizations insure accounts of up to $250,000 per person. This means if you reach that amount in one account, it is extremely wise to open another account to keep saving.
5. Get overspending under your control
Let’s not lie to ourselves. We are lazy. If you make it difficult for you to have access to your own money, chances are you will not spend it unnecessarily.
Yes, anyone can easily link accounts to facilitate automated clearing house network transfers. However, these transfers usually take up to three business days to complete.
If you have a tendency to spend your savings impulsively, having to go through the hassle of waiting that long will make you think twice before spending.
6. Automate your savings for multiple savings accounts and forget about it
Have you ever experienced accidentally finding money inside your pocket?
You may not think saving money can feel like that, but if you automate the process, at some point, you are going to forget you are saving.
Then, when you remember, you will be surprised at how much you have. It will feel like you have just found a few extra bucks in your pocket.
Do not connect your savings accounts as overdraft protection.
Instead, keep them isolated and only connect them to an account that you will use to transfer money into and never out of it.
If you have multiple automated savings accounts, chances are you will forget about at least a few of them for some time.
Just time enough for you to be in for an awesome surprise.
7. Establish and manage accounts for minors to teach them about money
Open a savings account for your children and help them establish the healthy financial habit of saving. This can be a great way to introduce them to finance in actual practice.
This is way better than just talking to your kids about money.
Besides, it will spark conversations that you would not otherwise have the chance to have with a child in such a natural way.
The Bottom Line
Now that you know a few reasons why you should have multiple savings accounts, it is time to take action.
Start moving your money into a few accounts, and you will start thinking about savings through a whole new perspective.
Recommendation: a High-Yield Savings Account will maximize your earnings
A savings account is a necessity. Everybody should have at least one to keep some money safe for the future.
But nowadays, we have a better option than the regular savings account. We’re talking about the high-Yield Savings Account – also known as HYSA.
These accounts will give you much more interest on your savings. If you’d like to learn more about it, check the Axos High Yield Savings Account review on the following.
About the author / Danilo Pereira
Petal® 1 Visa® or Petal® 2 Visa®: which card is better?
Unsure if you should get a Petal® 1 Visa® or Petal® 2 Visa®? Check out this comparison to help make your decision.Keep Reading
Gap Good Rewards Mastercard® Credit Card application
Learn all about the application process for the Gap Good Rewards Mastercard® Credit Card and what benefits you can enjoy once approved.Keep Reading
You may also like
Platinum Secured Credit Card from Capital One review
Check out our Platinum Secured Credit Card from Capital One review and learn how you can achieve a prosper financial future for yourself.Keep Reading
Best Personal Loans for November 2022
Looking for the best personal loan for you? In this article we are going to tell you about the best personal loans in November 2022.Keep Reading