As Jerry Seinfeld might have said had he joked about financial instruments, “What’s the deal with multiple savings accounts?” If the goal is to save, why do you have to stash money in so many accounts that you forget where you put it?
Well, we’re exaggerating there for effect. The reality is you don’t have to lose track of your money, but it’s still a good idea to create a few or even several savings accounts depending on your savings goals.
In the following article, we’ll give you the reasons why. First, however, let’s address the most important question that needs addressing when it comes to your saving habits (or lack thereof).
What Stops You From Saving?
A number of people across the globe struggle to save enough money for their retirement. CNBC reported in 2019 that most Americans, for instance, weren’t saving enough money to retire by the age of 65. Here are the factors that most keep them from it.
Life does get in the way. You have unexpected repairs or your spouse tells you they want a divorce. These unexpected life events can put our savings goals in a bind.
When that happens, it’s easy to get overwhelmed. Stay the course, though. You don’t have to give up the practice just because you’re going through some choppy waters.
Low Sales Resistance
Marketing teams are getting wiser about our behaviors. Technology, particularly artificial intelligence, is making it easier for them to know what you’ve got a weakness for and how to best tempt you to loosen your purse strings.
The more awareness you have of these tactics, the easier it’ll be to resist them. Take it personally that someone is trying to manipulate you, even if it means passing up that next sales blowout! Just keep telling yourself that sales are a dime a dozen and you can catch one later when you’re in a better financial position to do so.
Make a list before you go to stores. Only buy what you need. Use the web to your advantage to source the best prices, and don’t let those unexpected purchases derail your savings goals.
Frustration at Not Meeting Your Goals
Everyone falls short from time to time. The danger lies in getting so frustrated with yourself and overwhelmed by it that you abandon all hope.
Don’t let that happen to you. Accept the defeats when they happen. Start looking ahead at ways to absorb those failures in your future budgeting.
Not Enough Income
Making too little money can be a problem that you’ll need to address, either through tighter budgeting or picking up part-time work to complement your full-time.
You might even try a combination of each. It doesn’t have to be a permanent thing as long as it gets you where you hope to be. Now that we’ve addressed the roadblocks, here’s why multiple savings accounts make sense.
1. To Help You Meet Specific Goals
Multiple bank accounts make it a lot easier to set specific goals and work on them independently. You could have one for a home purchase, one for cars, one for retirement, etc.
The goal is to make sure each goal is getting a share of your income as you receive it. Otherwise, it’s too easy to spend money.
2. To Keep an Emergency Fund While Saving for Retirement
Another thing to consider when asking how many savings accounts should I have? Do you have the money to cover a trip to the emergency room or some other vital expense without having to charge it?
If the answer is no, then you need to start building that emergency fund immediately. Hello, additional savings account!
3. To Get FDIC Protection on All Your Money
Federal Deposit Insurance Corporation protection is available through every banking account to certain limits (currently $250,000 per FDIC-insured bank). Having multiple bank accounts with different banks allows you to protect all your money if you have a lot of it.
If you had $1 million in one account, for example, $750,000 of that would not be insured in the event of a loss. Spreading it across four would make sure you’re covered.
4. To Expand Your Banking Options
Not every bank is readily available in different parts of the country. Keeping multiple accounts throughout different regions, however, can get you close to 100 percent coverage to avoid service fees and other costly inconveniences that come when you use a bank with which you don’t have an account.
5. To Take Advantage of Perks
Many banks offer perks for banking with them. This could be rewarded with special advantages through the use of their debit cards or extra cash if you deposit a certain amount and meet the ongoing service requirements. Might as well get what you can get!
6. To Test Service Levels
Another thing to consider when pondering can you have multiple bank accounts: not all banks are created equal. Some, like community banks, feature more personalized service, for example.
It’s a good idea to test the products and service levels. This will help you understand what you prefer out of a bank.
7. To Circumvent Withdrawal Limits
Some savings accounts hold account-holders to strict withdrawal standards (like six a month or nothing beyond a certain limit). They do this to prevent the user from getting too withdrawal-happy. Multiple accounts, however, allow you to save and withdraw what you need when you need it.
8. To Engage in Competitive Savings
Setting targeted goals for each account can activate an internal sense of competition in your brain. As a result, you could find yourself “competing” between the accounts to see which hits its target first. This usually results in more aggressive savings, which is never a bad thing.
9. To Move Earmarked Funds Quickly
Again, the longer your freshly acquired paycheck sits in an account, the more tempting it is to use it before you’ve properly earmarked each piece of the check for what it needs to be used for. Setting up automatic withdrawals to multiple accounts that have a clear purpose will keep you from going crazy.
Multiple Savings Accounts Will Help With Financial Goals
The multiple savings accounts option is a good one to use if you feel tempted to spend money the moment you get it. It also has practical uses that add to your convenience and overall savings goals. If you’re ready to start your savings journey with multiple accounts, contact Signature Bank today.