Here's Why I Have 3 Different Savings Accounts

Having multiple savings accounts helps me stay on track for different goals.

I've always been a saver -- it's something my parents instilled in me since I was a little kid. In fact, I've been socking money away in the bank ever since my teenage years, when my income was limited to babysitting and caring for neighbors' pets.

These days, I work full time, so I have more opportunity to stash money in the bank. But rather than keep my savings in a single account, I have three separate savings accounts. Here's how they break down.

1. My emergency fund

As a general rule, it's a good idea to have three to six months' worth of living expenses tucked away in the bank for emergencies. That way, you're protected if large unplanned expenses pop up, or if you lose your job and need to live off your savings when your unemployment benefits don't cut it.

Now I happen to have more like a year's worth of living expenses in the bank. The reason is because I'm self-employed with a variable income, so I don't get paid time off in the event I can't work for a period of time. But either way, I like to have my emergency fund in its own savings account so I know not to dip into it for any other reason. Or, to put it another way, that account is the one I just don't touch unless there's an absolute need.

2. My vacation fund

My family likes to travel, and in recent years, our trips have run the gamut from a week at Disney World to an almost month-long cross-country road trip. All of these adventures cost money, though, so I make a point to consistently put extra cash into my vacation fund as I'm able to.

As a freelance writer, I often have the option to take on extra assignments, and the money I earn from them isn't income I necessarily need to cover my immediate bills. That money can go into my vacation fund, and when travel plans come up, I can dip into that account with a clear head knowing I'm not tapping funds earmarked for emergency purposes.

3. My second home down payment fund

My husband and I have toyed with the idea of buying a vacation home for years. Doing so would be a stretch for us, and we'd want (and need) to rent out that home on a partial basis to help pay for it. But just as I like to stick extra money into my vacation fund, so too am I in the habit of putting extra earnings into my second home down payment fund. That way, I'm not tempted to dip into that account to pay for vacations or other expenses.

It's all about money management

Having three separate savings accounts makes it easier for me to manage my money. My vacation fund, for example, is an account I'll dip into without any guilt because I know that money is there for leisure purposes, whereas seeing my down payment fund balance grow gets me closer to meeting that particular goal.

Not everyone needs three (or more) savings accounts, but I do recommend having a separate emergency fund. That's money you really need to be careful with, so keeping it separate is a good way of training your brain to recognize that it's off limits. It's a system that's worked for me for many years.