Here’s Why You Need Multiple Savings Accounts

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When you open a savings account, you might have a specific goal in mind or you might just be saving for emergencies. Keeping all the money in one account, however, might cause you some problems in the future. Choosing to have multiple savings accounts can help you manage your money, your savings goals and offer you protection for your savings. You might also be able to find higher interest rates when you open an online savings account.

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Reasons to Have Multiple Accounts

There are many different reasons why you might choose to have more than one savings account. Here are five primary reasons you should have multiple savings accounts:

Protect Your Savings

One of the biggest reasons you should have multiple savings accounts is to protect your savings. Using an online account or opening a savings account at a different bank than your checking account makes it more difficult to transfer money between accounts since it can take two to three days to transfer. This can help reduce impulse spending, while still giving you access to the money when you need it.

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Save More Quickly

Although you might have your emergency fund in the same bank as your checking account, it might not be earning a very high interest rate. Look for a bank or credit union that offers accounts with higher interest rates, which can help you reach your savings goals more quickly. Online banks and credit card companies offer high-yield savings accounts that will allow the interest rate to accrue more quickly.

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Track Your Savings Goals

While it might be easier to set up an automatic transfer to just one account each month, your savings goals might be difficult to track because the money is all in the same account. Having two separate accounts such as one for an emergency fund and another for a down payment on a home — makes tracking your goals easier, and it keeps your other funds safe should an emergency arise.

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Keeping Your Finances Separate

Even though you and your partner might have a joint savings account to save for a collective financial goal a vacation or wedding, for example you should still consider keeping a separate savings account for your own financial goals. If you and your partner were to split up, there is no financial protection like you would have with a divorce.

Take Advantage of FDIC Insurance

The FDIC will cover up to $250,000 in combined account totals for the same depositor in the ownership category. If you have more than that in a certificate of deposit, savings account or a money market account at the same bank, you should move some of that money to a savings account at another bank to ensure it’s protected.

Read More: Questions to Ask Before Opening a Savings Account

Types of Savings Accounts

When you are opening a new account, you should look for a high-interest savings account. Here are three basic types of savings accounts that offer a higher interest rate than your traditional savings account:

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