Can You Have Too Many Savings Accounts?

nortonrsx / Getty Images/iStockphoto

You’re serious about saving. Right now, you have at least one savings account, but you’re thinking about opening more.

Before making your move, you want to be sure opening another is a good idea. Keep reading to learn more about having multiple savings accounts.

What Is a Savings Account Best For?

If you want easy access to your money, keeping it in a savings account can be a wise move. This will allow you to earn interest on your money, while keeping it within close reach.

Some savings accounts might limit the frequency of withdrawals, but they’re generally considered a good choice for an emergency fund or any other short-term cash needs. Most are attached to relatively low interest rates which is the compromise for the quick and easy liquidity option.

Here’s Why It’s Best To Have Multiple Savings Accounts

You have many different financial goals — building an emergency fund, saving for vacation next summer, saving up to remodel your kitchen. When your savings is intertwined, it can be hard to really focus on one specific goal.

This isn’t to say you need to open a new savings account for every financial goal on your list. However, breaking it down a bit can help you monitor your progress toward these goals.

One exception is your emergency fund. Keeping it separate is highly recommended, so you know you’ll have money at your fingertips to rely on in case of an emergency. These savings can come in handy for job loss, car repair, medical bills or any other unplanned major expense.

Pros and Cons of Having Multiple Savings Accounts

If you’re unsure whether you should open another savings account — or have more than one — here are a few pros and cons to consider.

Pro: Easily Track Your Progress Toward Goals

Using different savings accounts for different financial goals can make it a lot easier to monitor your progress. You’ll be able to look at the balance and quickly see how far you’ve come and how much more you need to save to reach your goals.

When you only have one savings account, things get more complicated. You have to break the balance down across multiple goals. This makes it hard to remember exactly how much you’ve saved toward each goal.

Con: Potentially Earn Less Interest

The more money in your savings account, the more interest you earn. If you have multiple savings accounts, it’s unlikely they’ll all have the same interest rate. This could cause you to earn less interest overall than you would if you were just using one high-yield savings account.

Pro: Enjoy Greater Flexibility

It’s not always possible to save the same amount toward each goal every month. When you have multiple savings accounts, it’s easier to adjust the amount you’re saving.

If needed, this allows you to put aside more or less than usual for one goal, without impacting the others. It can be easier to prioritize when your savings is spread across different accounts.

Con: Too Many Accounts Can Cause Confusion

In theory, having several savings accounts might sound like the ultimate way to stay organized. However, it can also be a lot to manage.

If you have to monitor several different savings accounts each month and potentially manage transfers from your checking account, this can easily lead to mix-ups. Some people will have no problem with this, but others will struggle. Be honest with yourself about your ability to handle this many accounts.

Pro: Reduce Temptation To Spend Your Emergency Fund

You know you need at least three to six months of living expenses in your emergency fund. However, if that money is in an account you’re using to save for other goals, it can be enticing to use it.

If you only need a little bit to reach a different goal, you might think borrowing from your emergency fund is harmless. However, this can be a difficult habit to break. Ultimately, it can even cause you to have little-to-no money to fall back on in the event of an emergency.

Traditional Savings Account vs. High-Yield Savings Account

You might think a savings account is just a savings account, but it’s not. Here’s an overview of both a traditional savings account and a high-yield savings account.

Traditional Savings Account

You probably won’t get the highest interest rate with a traditional savings account. But these accounts allow you to open an account with a low minimum deposit. The account might have a required minimum balance, but you will be able to make immediate withdrawals when needed.

An added bonus, if you want the option to visit a physical branch location, you’ll be able to find this savings product at a traditional bank.

High-Yield Savings Account

Typically offered through online banks and online credit unions, a high-yield savings account allows you to maximize interest earnings. As long as you’re comfortable managing your account online, you can feel confident that your money is safe, as these accounts are insured by the Federal Deposit Insurance Corporation and the National Credit Union Administration.

Do note, some banks do not offer ATM access for this type of account. If this is something you need, be sure to read the fine print.

The Best Interest Rates

You’re ready to put the money in your savings account to work. But where can you get the best rates? Where can you get 6% interest on your savings? As of Aug. 21, 2023, the national average interest rate on savings accounts is just 0.43%, according to the FDIC.

Despite that, you can find a high-yield savings account offering a much higher rate, if you’re willing to look. It’s a bit of a stretch, but a couple of financial institutions offer a 6% interest rate on savings accounts, including Digital Federal Credit Union and Mango. Keep in mind that there might be account requirements you’ll need to meet to qualify.

Final Take

Can you have too many savings accounts? Ultimately, the amount of savings accounts considered too many varies by individual. Some people consider two savings accounts to be too many, while others can easily manage several. The best route to take is the one that works for you. Open one new savings account at a time and use it for a while before deciding if opening another is a good idea.

Data is accurate as of Sept. 13, 2023, and is subject to change.

Share This Article: