The Pros and Cons of Multiple Savings Accounts
While having a single savings account can provide a solid foundation for building wealth, it’s not always the best strategy when it comes to growing your cash. Depending on your spending and saving habits, having multiple accounts can make it easier to increase your savings. Explore the benefits and drawbacks to having multiple savings accounts to see if this option is right for you.
Advantage: Protect your savings from yourself
If you frequently find yourself tapping into your savings account for non-emergency spending, having multiple savings funds is a wise strategy. You may want to consider having one savings account as your emergency fund that’s easily accessible. Then, store the remainder of your savings in multiple accounts that are a bit more challenging to access. To accomplish this, try going with an account that imposes an early withdrawal fee.
Advantage: Contribute toward multiple goals
Base each savings account on a short- or long-term goal. Put together a range of different goals you might want to make an individual savings account for, such as your kid’s college fund or an upcoming major expense. Having your savings allocated toward multiple goals allows you to easily monitor your progress toward reaching them. If you have a down payment, summer vacation and three months’ worth of income funds, you simply have to open all three accounts to visually see how close you are to your target amounts.
Disadvantage: Harder to meet the minimum balance requirements for earning interest
Some savings accounts have a minimum balance requirement to maintain to earn interest. If your overall savings amount is dispersed among a variety of accounts, meeting this minimum balance can prove challenging.
Disadvantage: More confusing than having a single savings account
Having different savings accounts sometimes means you’ll have to decide how to allocate unexpected bonuses from work or occasional income such as birthday money or cash gleaned from a side job. Not everyone wants the stress of having to apportion unexpected income. Having numerous accounts also makes automatic transfers a bit more muddled, since you’ll have to set up automatic transfers for separate accounts instead of just one.
Having multiple savings accounts comes with its own set of pros and cons. By familiarizing yourself with the advantages and disadvantages of this saving strategy, you can confidently make the best choice for your personal finances.
Talk to a Washington Trust banker today to discuss your savings goals and which accounts, products, and strategies will work best for you to achieve those goals. Click here to view all Washington Trust savings account options.
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