You might be considering opening more savings accounts, but before you do, it’s important to understand if it’s a good idea. Here is a breakdown of having multiple savings accounts:
What Is a Savings Account Best For?
A savings account offers easy access to your money while earning interest. It is typically used for short-term cash needs or emergency funds with relatively low interest rates.
Here’s Why It’s Best To Have Multiple Savings Accounts
Having multiple savings accounts can help you focus on specific financial goals, such as building an emergency fund, saving for a vacation, or remodeling your kitchen. It allows you to track your progress easily and keep your emergency fund separate.
Pros and Cons of Having Multiple Savings Accounts
Consider the following pros and cons before deciding to open more savings accounts:
Pro: Easily Track Your Progress Toward Goals
Using different savings accounts for different financial goals makes it easier to monitor your progress.
Con: Potentially Earn Less Interest
Holding multiple savings accounts with different interest rates may lead to earning less interest overall.
Pro: Enjoy Greater Flexibility
Having multiple savings accounts allows you to adjust the amount you save for each goal without impacting the others.
Con: Too Many Accounts Can Cause Confusion
Managing multiple savings accounts and potential transfers from your checking account can become confusing.
Pro: Reduce Temptation To Spend Your Emergency Fund
Keeping your emergency fund separate from other savings accounts helps prevent it from being used for other purposes.
Traditional Savings Account vs. High-Yield Savings Account
There are two main types of savings accounts: traditional savings accounts and high-yield savings accounts.
Traditional Savings Account
Traditional savings accounts offer lower interest rates but allow for immediate withdrawals and are often available at physical bank locations.
High-Yield Savings Account
High-yield savings accounts offer higher interest rates and are typically offered by online banks and credit unions, but may not have ATM access.
The Best Interest Rates
The national average interest rate on savings accounts is 0.43%, but some financial institutions offer rates as high as 6% for high-yield savings accounts.
The number of savings accounts considered too many varies by individual. It’s best to start with one new savings account and see if it works for you before deciding to open another.
Data is accurate as of Sept. 13, 2023, and is subject to change.