Congratulations on opening a savings account to save money! It’s a smart move, but did you know that there’s an even smarter move? Opening just one savings account isn’t technically the best way to put aside money. Here’s why it makes sense to have more than one savings account.
Different accounts help you save for specific things
Having multiple savings accounts helps you save money for specific things or goals. For example, one account could be for a new family car, while another could be for your child’s college tuition. You can even get accounts specifically for buying a house.
The benefit of keeping your savings separate is that you have a better idea of how far along you are for each goal. It also means you can prioritize certain goals over others. The result is a much better savings strategy that doesn’t pool all of your money together in one place.
Take advantage of different interest rates
Interest rates dictate how much money you’ll gain from a savings account. When all of your money is in one account, you’re restricted by its interest rate. And what if the bank goes through a particularly difficult time and has to lower its interest rates? This happens from time to time and means that your money won’t be doing much for you.
Instead, using different savings accounts lets you take advantage of multiple interest rates. Some accounts have better rates than others. And some come with restrictions, such as: how much money you can have in the account, how much money you can put aside each year, or when you can withdraw it.
You also have things like CDs (Certificate of Deposit) that are similar to savings accounts with way better interest rates. The only difference is that you can’t add more money each month.
But overall the point is, you can maximize the interest you generate by having a few different accounts here and there.
In case of emergencies
Opening multiple savings accounts may seem like a lot of hassle. But it’s always worth having at least two. This way, you will have an extra account for emergencies. In this account, you’re not saving for anything in particular. It exists to hold your money and accumulate interest until you need it. When something happens out of the blue, you use this account to cover as much of the costs as possible. Thus, your current account isn’t affected and you don’t have to dip into other savings that were for different things.
See, it makes a lot of sense to have more than one savings account! If you only have one account, you’re restricting yourself. You might not get as much interest as you could if some money was in a different account. You also may find it harder to figure out how much money is saved for each specific goal in life. Start thinking about saving money as an investment. It’s always a good idea to diversify investments, so diversify your savings too!