Multiple Savings Accounts and Why You Need Them

These days many banks offer multiple savings accounts. And I’m glad that they do. Multiple savings accounts is a great way to organize your financial goals and easily track your progress. The trick to a strong personal finance system is to always balance complexity with value. While having multiple accounts will add some complexity to your management, they provide much better control over your money.

Personally, I use ING Direct for various savings goals. The best part: I can have different automatic transfers to each of the different goals I have. For example, currently I’m saving for a down payment, my emergency fund, and my vacation fund. With automatic transfers, I can see each account slowly creep towards my goal, and it encourages me to bump the automatic transfers to even higher numbers to accelerate my progress.

The Problem with a Unified Saving Account

You made goals. You set a timeline. And you created actionable steps. Great! But on your way towards achieving your goal, where do you keep your money? How do you keep track of your progress? In the olden days, you would have a single savings account with your bank, and you would have to keep track yourself.

Let’s say that you were planning a trip and wanted to buy plane tickets with the money in your savings account. How did you know how much money you could use for the tickets? Are you sure you weren’t spending money for your emergency fund? Well unless you kept extremely detailed tabs on your savings, you may not actually know.

This is the inherent problem with a unified savings account. Especially when your savings goals are a mixture between protective goals (emergency fund) and what I like to refer to as fun money (new car, vacation, etc). Making the mistake of overspending in one of your goals could have a really negative effect on your other goals.

Banks that Allow Multiple Saving Accounts

From my research I found four banks that offered multiple savings accounts. I’m sure that there are more out there, so if I missed one then please post a comment and I’ll update the list.

• ING Direct – This is what I use, and it couldn’t be easier to open multiple accounts.
• Ally – I’ve read that making multiple accounts through Ally is just as easy as ING Direct, although I don’t have an Ally account to confirm this
• FNBO Direct – Similar to ING Direct and Ally, their multiple savings account feature is geared towards saving for multiple goals.
• HSBC Direct – I’ve read that while it’s not quite as easy to set up multiple accounts as the others, it is possible to set up multiple accounts with HSBC Direct.
• SmartyPig – While SmartyPig isn’t a traditional online bank, they make it easy to set up multiple goals.

What About Interest Rates?

Personal finance is not always about math. This is another perfect example of that. While the little mathematician in you may want to chase after the bank with the highest interest rate, that’s not important in the end. Creating a system that you’ll stick to is much more important than squeezing the few extra dollars out of your money with higher interest rates. In the end what matters the most is whether or not you follow through.

Your Take

Do you currently use a bank with multiple savings accounts? If not, how do you determine your progress towards your goals? Do you know any other banks out there that offer multiple savings accounts or sub-accounts?

(Photo credit: alancleaver)

Related posts:

1. Managing Joint Accounts in a Relationship
2. Pay Yourself First
3. How big to make your emergency fund
4. Dropping the Emergency Fund
5. How much money should you keep in your checking account?

Tagged as: bank accounts, emergency-fund, Goals, Saving