When Hoarding Your Pennies, How Many Savings Accounts Should You Have?

Saving money isn’t a one-dimensional endeavor.

Pause to consider all the things you’re putting money away for. A down payment on a house. Cash for that overseas trip. A cushion for unexpected emergencies.

Chances are you’re accumulating funds for several objectives at once, and those are just your near-term aims. We won’t even delve into long-range plans like retirement right now.

You likely stash your short-term savings in a basic savings account … or several. Some people prefer dividing their money into distinct accounts for each aim, while others consolidate all their savings in a single place.

Financial tendencies and habits usually dictate how many savings accounts someone holds, says Holly Peterson, financial consultant and owner of Elite Retirement Strategies in Pocatello, Idaho.

“Some people are more effective with multiple savings accounts set up for different goals or purposes,” she says. “Others become overwhelmed moving funds around and abandon the idea of saving. There’s no universal ‘right’ method.”

So whether you maintain one account or a dozen, you’re not necessarily wrong. Let’s examine these two strategies for handling various savings goals and how you can succeed as a saver using whichever approach fits you best.

Separating Savings for Clearer Financial Picture

Assigning specific accounts to distinct savings goals helps many people keep their finances organized.

Fo Alexander and her husband Ben, from Greenville, South Carolina, manage seven separate savings accounts. One is dedicated to their emergency fund. Another is for future home repairs or upgrades. Two are general savings. The remaining three are tied to business purposes.

Alexander, who runs the blog and podcast Girl Talk With Fo, says multiple accounts mean they don’t have to guess or do calculations to know precisely how much they’ve saved for each purpose.

“We wouldn’t handle [our money] any other way,” she said.

5 Perks of Having Several Savings Accounts

1. The money for each goal is kept in its own bucket. You can see exactly how much is allocated for each target, so when you withdraw funds for, say, a vacation, you aren’t accidentally dipping into your car fund.
2. Watching how near (or far) you are to each goal can motivate you more than seeing one big balance in a single account. Alexander puts it like this: “Knowing that you’re saving for a house versus just saving gives you more incentive to reach your goals.”
3. Different banks and credit unions offer varying advantages. You might appreciate the excellent service at your local credit union, but prefer to park your emergency reserve at an online bank where you’re less tempted to withdraw. Some institutions even provide cash bonuses for opening new accounts — another enticing benefit.
4. You and your partner may want separate accounts for personal aims. Multiple accounts can also make sense if you want distinct savings for each child.
5. Many savings accounts limit how often you can take money out. If you expect to exceed the monthly withdrawal limit, maintaining multiple accounts can be helpful.

How to Make Multiple Accounts Effective

When managing several accounts, consider giving each one a clear name.

“Labeling your savings improves your odds of success,” Alexander said.

She also suggests automating transfers if you struggle to move money manually. Before marriage, she had her employer route a portion of her paycheck into particular accounts.

Now Alexander and her husband set aside time every other week to review their finances and allocate money into savings according to their priorities.

Keeping It Simple With One Account

Not every saver chooses the multiple-account route.

Evan Sutherland, of Pullman, Washington, keeps all his savings in one account and relies on a thorough budgeting system to manage multiple goals, such as saving for holidays, trips and semiannual bills.

He and his wife, Nikayla, who run the blog Budgeting Couple, use the widely used budgeting tool EveryDollar and set up digital sinking funds to earmark money for particular objectives.

Among the things they regularly save for, the Sutherlands set aside funds for vacations.

“Instead of opening a travel savings account and funneling $80 a month into it, we just budget $80 each month,” he said.

By tracking how often and how much they’ve contributed to the travel sinking fund, they know how much they can spend on their next getaway. Sutherland says adding more accounts on top of his budgeting system would be redundant.

5 Benefits of Sticking With One Savings Account

1. You only need to monitor deposits, withdrawals and account details for one place, saving you time and hassle.
2. If your bank charges a monthly maintenance fee, you’ll pay it for only one account instead of multiple ones.
3. Some accounts require maintaining a minimum balance. It can be simpler to meet those criteria when all your savings are consolidated.
4. Splitting money across accounts with varying interest rates can reduce total interest earned. You’ll likely get higher returns if you concentrate savings in one high-yield account.
5. Even when your priorities shift, a single savings account remains useful. If you open several accounts for one-off goals (like a wedding), those accounts will sit empty and serve no purpose once you’ve spent the funds.

How to Manage With One Account

Sutherland’s approach demonstrates you don’t need separate accounts to save for distinct goals. The essential part of using one savings account is having a tracking method so you know how much of your balance is reserved for each objective.

Sutherland suggests using budgeting software that supports sinking funds. If you’re unsure which app suits you, check reviews of top budgeting tools to find one that matches your needs.

You also don’t have to attempt saving for every goal at once. If you’re engaged and budgeting for a wedding but also hope to buy a home in a few years, you can prioritize the immediate expense first and then focus on a down payment after you’re married.

“There are many strategies available for saving money — but ultimately, the best strategy for you will differ from what works for someone else,” Peterson, the financial consultant, counsels.

No matter your approach, the most crucial thing is to prioritize saving.

Nicole Dale is a senior writer at Savinly. She is working on paying down debt and saving for a home.