A savings account is an interest-bearing deposit held at a bank or other financial institution. Typically, the interest is modest, but they are a great choice because of their safety and reliability. Here are some benefits of having multiple savings accounts.
Pros of having multiple savings accounts
Having different savings accounts allows you to earmark each for a different financial goal. This allows you to track your goals more efficiently. It helps keep you focused and organized. Each account has a specific purpose. Goal-based savings makes it easier to save and keeps you safe, so an account for emergencies, another for school fees, and another for living.
Enhanced financial security
While savings accounts are not risky, there is some benefit to spreading your risk and not having all your money in one bank in one account. Different banks also offer different benefits and if you want to enjoy all the offerings you think are good for you, you can open accounts in different banks. It’s an opportunity to enjoy the best of all worlds.
Reduces the likelihood of misspending
Having all your money in one place that you regularly access increases your likelihood of misspending and overspending money. Separating money that’s earmarked for different purposes reduces your likelihood of going rogue.
Easy decision making
Having different savings accounts that serve different purposes makes financial decision-making clearer. If you decide to go on vacation, you know exactly where that money is coming from. It can’t be from your emergency fund or a school fees fund, for example. It helps keep you in check and helps you know where the money for each activity is coming from.
Reduce dependency on one bank
Have you ever received that message about your bank’s online banking platform being down just when you need it? Having multiple savings accounts decrease your dependency on a single bank and in so doing decreases the risk of finding yourself in trouble because that bank is in its own trouble.
Cons of having multiple savings accounts
You have to make sure you meet the minimum balance of each savings account, failure to which you may incur certain charges. You need to be able to maintain the minimum balance at all times. A way around this is to only open accounts that don’t have a minimum balance requirement. You should also select accounts that have hidden charges that could end up piling up.
Keeping track of the transactions in multiple savings accounts is harder. If you’re trying to manage too many accounts, one could slip under the radar and go dormant as a result of no activity. This could incur charges or penalties when it comes to reactivation. Some credit and debit cards also expire when they’re not used within a certain time period and getting new ones costs money.
Having multiple savings accounts can make it difficult to build a relationship with the different banks. Having a relationship with your bank can help you get better rates and extra support.
The goal is not just to have your money spread out in different accounts but to do so with certain guiding goals in mind.
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