Although the number of savings accounts you should have depends on your preference, it is advisable to hold two or more. There is no limit to how many savings accounts you can own. Just ensure that you are able to manage them properly.
Keep reading this article to learn about the various savings accounts you can open. Moreover, we will teach you the advantages and disadvantages of having multiple savings accounts.
What is the recommended number of Savings Accounts You Should Have?
As mentioned, you can have as many savings accounts as possible. Head of Family Banking at Chase, Matt Gromada, says having more than one savings account is helpful since it helps you to allocate funds for each of your goals.
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Here are some of the savings accounts you can consider opening:
Emergency Fund Savings Accounts
Having this type of savings account is key. It helps you cover unexpected expenses like medical bills or car repairs without going into debt. Many financial experts recommend holding money in an emergency fund savings account that is enough to cover your living expenses for at least three months. This can prove to be helpful, especially when you lose your job.
Other Savings Accounts
Besides an emergency fund account, there are other savings accounts that you can consider opening. They include a vacation fund, a wedding, birthday, or anniversary celebration fund, a holiday and back-to-school shopping fund, and a down payment for a home or car.
Where Should You Open Savings Accounts?
You can open savings accounts with multiple or a single bank, depending on your preference. Keeping money at a single bank simplifies the management of savings accounts since you are able to manage them within one app. But suppose you are in the United States, and your savings fund is over $250,000. In that case, it is advisable to spread it among multiple banks to have it insured by the Federal Deposit Insurance Corporation.
One advantage of having savings accounts in different banks is that your chances of earning higher passive income increase. That’s because one bank might be offering a higher interest rate than others.
Advantages and Disadvantages of Owning Multiple Savings Accounts
Wider FDIC-insurance protection – The Federal Deposit Insurance Corporation has capped the insured amount for each depositor at $250,000 per bank. Therefore, if your savings are worth more than the insured figure, you are putting your money at risk if you keep it in one bank. So, it is recommended you open savings accounts in various banks.
You can stay organized with several savings goals – Having multiple savings accounts for various goals helps you track your progress easily and keeps you committed to reaching your savings objectives.
Potential higher yields – As stated earlier, some banks may offer higher interest rates than others, thus giving you the opportunity to make more money passively.
More accounts to monitor – It can be super challenging to manage multiple savings accounts, especially if you open them in different banks.
A minimum balance requirement may apply – Some banks require you to maintain a certain amount in your savings account to cover monthly fees.
Potential low interest rates – In some banks, the interest you earn depends on the amount of money you are holding in your savings accounts. The lower the savings fund, the lower the interest rate; the opposite is true.
How to Manage Several Savings Accounts Effectively
Most banks let customers nickname their savings accounts to make it easy for them to locate the right account. For instance, if you are saving to buy a phone, you can name the savings account “iPhone 15.”
Look for Banks Offering Higher Rates
Remember, the goal is not just to save. You want to earn passive income while you hold your money in a particular bank. For this reason, always research the banks offering reasonable interest rates before opening a savings account.