Here's Why I Don't Keep All of My Savings in the Same Account

I started building an emergency fund from the moment I was able to land a steady paycheck. In fact, technically I started building emergency savings during my teenage years, when my only income was a measly $5 an hour from babysitting. But I did a good job of sticking that money into the bank, even if it didn't amount to much.

For quite some time, my emergency account was the only savings account I had. But over the past few years, I've opened several other savings accounts on top of that one. And that system has been instrumental in helping me manage my money.

Why separate savings accounts are essential for me

These days, I have a few different accounts:

• My general emergency fund, which is meant to cover my non-negotiable bills in the event of unemployment
• My home repair/car repair/medical bill emergency fund, which is meant to cover those expenses
• My vacation and home improvement account, which I can dip into for leisure purposes or to upgrade my living space, including buying furniture

The reason I keep my savings accounts separate is simple. I want to make sure I have a certain amount of emergency savings in case I lose my job or need to take time off of work and forgo earning an income. I also want to make sure I have funds available to pay for purchases like a new tire when I run over a nail (something that, grr, happened to me just a couple of weeks ago) or a new heating system for my house (something that, double grr, I also had to shell out money for this month).

At the same time, I want to be able to take withdrawals for fun expenses like vacations without having to stress about being short on funds for other important purposes. And keeping my accounts separate allows for that.

Also, it prevents me from accidentally dipping into the wrong pile of cash reserves. If I were to take a $4,000 withdrawal for a family vacation out of my home/car/medical fund, I might end up short on cash to cover those expenses the next time they arise. That's stressful. And I don't like stressful situations. So keeping my funds separate is a super easy way to avoid that.

Separate accounts could benefit you

A lot of people maintain a single savings account and call it a day. Actually, let's backtrack. A lot of people don't even have savings at all. A recent CNBC survey found that 61% of Americans live paycheck to paycheck, which generally means you have no savings to fall back on and can't pay your bills until your next paycheck arrives.

But let's assume you're someone who has savings, and for a specific reason. It probably took a lot of work to build those savings. Do you want to risk dipping in for the wrong reason and winding up short after you made that effort to save?

Probably not. That's why I highly recommend having separate savings accounts for different purposes. This isn't to say you can't transfer funds between accounts if you have to, though. If you have a $6,000 emergency fund and a $3,000 vacation fund, and then your home ends up needing a $7,000 repair, you could always take $1,000 out of your travel fund to make up the difference.

But let's say you don't have that home repair, and you do decide you want to spend a week in the Caribbean at a $2,500 price tag. If you've saved $3,000 for that purpose, you should be able to do so without guilt and without putting your finances at risk. So if you stick to a setup like mine, you can pull something like that off with relative ease.