3 Benefits of Having Multiple Savings Accounts
by Maurie Backman | Published on Oct. 5, 2021
Some people don't have a single savings account. But here's why having a few could work to your advantage.
It's an unfortunate fact that many people don't have a savings account at all. So if you have money stashed away in the bank, you're in a pretty good spot. That said, at some point you may decide to open more than one savings account. Here are a few benefits you might enjoy if you go that route.
1. You can set funds aside for different financial goals
You may have several objectives you're saving for. Most people are advised to set aside three to six months' worth of living expenses in an emergency fund. But you may want to keep your emergency stash separate from your remaining savings, which is why opening multiple accounts could be a smart move.
Say that in addition to emergency savings, you want to set money aside for a down payment on a home and also save up for a big vacation. In that case, it could make sense for you to open three savings accounts. That way, you can track your goals and avoid accidentally leaving yourself with too little cash for emergencies.
2. You get more protection
When you deposit money into a savings account, as long as your bank is FDIC insured, you're protected from losing money -- up to $250,000 per depositor -- if your bank were to go under. If you spread your savings out across multiple banks, you could get more protection.
Now to be fair, this isn't a problem most people have. In fact, it may not be a good idea to have more than $250,000 in savings. If you're really sitting on that much cash, investing some of it in a brokerage account may be a better bet. But if you have a specific reason for having that much money on hand -- say, it's earmarked for a home down payment but you just haven't found the right house yet -- then spreading it out across more than one bank could give you more security.
3. You can enjoy the perks of both a physical bank and an online bank
If you open a savings account at an online bank, you might enjoy a higher interest rate on your money. Online banks don't have the same overhead as physical banks, which means they can often pass on some of that savings to customers in the form of higher interest rates.
But there are drawbacks to only having an online bank account, like not being able to go into a branch to take withdrawals or enjoy benefits that can only be performed in person, like notary services. So it could be a good idea to keep some money at a brick-and-mortar bank in addition to an online one.
For some people, a single savings account will meet their needs. And the upside of having one bank account is keeping track of all of your money in the same place. But it does pay to consider the benefits of having multiple savings accounts -- especially if you're saving for several objectives, you have a lot of money in cash, and you're worried that only having an online bank account will be too limiting.
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