The accumulation of debt is one of the biggest challenges faced by westerners today. Particularly in the United States, people from all backgrounds and walks of life are seen to survive on credit. Saving money has become an old fashioned pursuit. We’re saving less, we’re saving older and we’re saving inefficiently. Part of the reason is a lack of education when it comes to financial management. Schools no longer teach kids how or why to save money. They grow into adults who don’t understand the options and don’t know how to get the most of their cash. For example, did you know it can be financially beneficial to open and use multiple savings accounts, rather than just one? Let’s take a closer look at when and why using multiple bank savings accounts is a good idea:
Efficient Money Management
One of the practical advantages of operating multiple savings accounts is the ability to divide your money up into goals, projects or ‘profit’ streams. In fact, with two or three accounts, you can exercise quite a lot of freedom. You could use one account for holiday savings, another for mortgage savings and a third for the proverbial rainy day.
Separation of Financial Goals
To expand on the previous point, the ability to save in multiple accounts means you’re less likely to confuse – deliberately or otherwise – long and short term funds. It’s easy to automate payments into a savings account. So, long term funds can be grown without temptation. Make a distinction between long and short term savings. Then, leave long term funds untouched.
Guaranteed FDIC Protection
While most of us don’t need to worry about having a bank balance that’s too large, it’s worth remembering FDIC insurance does have limits. Savings accounts are only covered up to $250,000. If you have more than that in your account, it won’t be fully insured unless you distribute it between two or more banks. This is an important requirement for anybody who consistently manages large sums of money.
Smaller Losses in the Event of a Crash
Opening multiple bank savings accounts is also a good idea if you’re concerned about the safety of banking institutions in general. While it’s difficult (if not impossible) to eliminate all risk when dealing with commercial banks, dividing your money is a good first step. If your savings are spread between various accounts, the losses will be smaller in the unlikely event a banking crash affects your money.
Eligibility for Multiple Perks
It’s common for banks to offer incentives (big and small) to customers who are considering opening a new account. There’s nothing to stop you from taking advantage of ‘new customer’ perks at more than one bank. Don’t forget, the interest rates on each of your accounts may be different too. Make sure to shop around for the best two or three interest rate deals in town.
Save Together and Apart
One common reason for opening multiple bank savings accounts is the desire to save alongside a spouse without giving up independent funds. With multiple accounts, you can save cash together with a partner or friend. This is a great way to accumulate money for joint projects and ambitions. At the same time, you can keep a separate savings account for personal pursuits and goals.
Enjoy Regular Successes
With a viable savings plan in place, you can grow multiple accounts at the same time. Even if they don’t grow quickly, they still represent lots of little triumphs. Success is motivating. And if you’re seeing consistent successes, no matter how small, it’s going to make you more determined to keep it up. Seeing those balances rise if a powerful form of positive reinforcement.
Finally, it’s worth finding out if your bank’s savings accounts place any restrictions on withdrawals. Some money market and savings accounts (but not all) limit withdrawals to around six per month. However, if you open multiple bank accounts, this won’t be a problem. Money management and distribution may require a little more thought, but it could be worth it for the freedom of unlimited withdrawals. It really depends on your personal circumstances.
Why It’s Easier Than You Think to Save Smart
Anybody has the option to open multiple bank savings accounts. The strategy won’t suit everybody though. People who are naturally organised typically benefit the most. They take full advantage of the freedom to monitor and move their cash in various ways.
If you’re organised and value freedom, safety and security when banking, opening multiple accounts could be the right choice for you. Just make sure to shop around and identify the very best deals. Compare interest rates and fees on all accounts before deciding.