Multiple Savings Accounts: The Secret To Budgeting?

By Zach Buchenau

Last Updated: December 20, 2021

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If you want to simplify, organize, and improve the way you budget and save money, you should consider opening multiple savings accounts.

Let’s be honest, most people have more than one reason to save money. Sure, the most common purpose is to prepare for financial emergencies, but what about vacations, automotive expenses, and all the other things that require financial preparation?

With so many reasons to save money, it just makes sense to organize it into separate buckets.

But how many accounts should you open, and what should you be saving for? Also, why is having multiple savings accounts the secret to budgeting?

These are the questions we are going to answer in the rest of this article.

Let’s get started.

Recommended Savings Accounts

Multiple Savings Accounts For Budgeting: 5 Major Benefits

When it comes to budgeting, we talk a lot about cutting expenses, managing impulse spending, and living within your means. Now, don’t get me wrong, those are all good things, but more often than not, that’s where the conversation stops. That’s also why most people have a disorganized pile of saving in one single account. (Full disclosure, that used to be me.)

If you really want to maximize your budget and live an organized financial life, you need to do more than organize your spending, you need to organize your savings.

So, in this next section, I am going to pick up the conversation where it usually ends.

Let’s talk about multiple savings accounts, and the beneficial role they can play in your financial life; in particular, budgeting.

Multiple Savings Accounts: Is it the secret to budgeting? | Be The Budget

1. Staying Focused and Engaged

For most people, saving money is a pretty passive activity. They put it in one single account and try not to think about it. But if you want to be the master of your money, and manage it to near perfection, you should be actively involved in the saving process.

That’s why separating your savings into multiple accounts makes so much sense. It forces you to break your money into separate categories, and pay individual attention to each of your financial goals.

On another note, one of the most important things you can do to achieve a goal, or build a good habit is to make it obvious. In other words, if you want to achieve a goal, you should set up a number of reminders that keep the goal in the forefront of your mind.

That’s why having multiple savings accounts is so powerful. When you log into your bank account, and see a savings account for each of your major goals, it’s a constant reminder to stay focused on each of them.

Interested in saving more money? We think you’ll love these:

2. Improving Your Financial Organization

When it comes to personal finance, disorganization is a recipe for financial disaster.

So, one of the first and most important things you can do to improve your financial situation, is to get organized.

And as I mentioned earlier, I’m not just talking about organizing your bills and expenses. You should also organize your savings by breaking your money up into different accounts.

For instance, let’s say you are saving for a car and a vacation at the same time. If you just pile all the money into one account, the lines between each savings goal become a little blurry.

When that happens, it’s a little too easy to spend your car savings on an overly-extravagant vacation; or the other way around.

3. Protecting Your Emergency Fund

Saving an emergency fund isn’t easy. It takes time and diligence. Plus, if we’re being completely honest, it can be hard to stare at a pile of cash big enough to cover your expenses for six months.

But your emergency fund is there for a reason, and it’s a big no-no to dip into it. So, you should separate it from any of your other savings. And, quite frankly, you should keep it in an account at a different bank altogether.

One of the most important reasons you should have multiple savings accounts, is to protect your emergency savings. In fact, at the bare minimum, you should have two savings accounts: one for your emergency fund, and another for all your other savings.

4. Less Guilt

I’m of the mind that your emergency fund should be untouchable–except, of course, in the case of an emergency.

Whereas, if you are saving for a car, it is perfectly acceptable to use the money to pay for a car.

That’s why, if you separate your savings into multiple accounts, you can pull money, guilt-free, from a savings account other than your emergency fund.

5. Tracking Your Progress

For those of you with more than one long-term financial goal, using multiple savings accounts is the simplest way to track your progress on all of them.

I mean, who wants to whip out a calculator, or enter numbers in a spreadsheet in order to break one big savings account into multiple goals? What a pain. Wouldn’t you rather just log into your bank account and instantly know how much money you have saved for each goal? That’s what happens when you use multiple savings accounts.

Tracking your progress in regard to all your savings goals is extremely simple when you have a savings account for each one.

How Many Savings Accounts Should I Have?

Ok, so we’ve discussed the benefit of multiple savings accounts for budgeting, but how many accounts should you have? Is there a point at which it becomes overkill?

Sure. I mean if you are saving for a small, one-time expenses, it doesn’t make sense to open a savings account. Rather, you should open a savings account for any long-term, or ongoing savings goal.

Now, that might mean something different for every person. But in general, here are a few sinking funds for which you might want to open a savings account.

Emergency Fund

I feel like I never stop talking about saving an emergency fund. But truthfully, it is just that important. I don’t care how old you are, or how much money you make, bad things can happen to anybody, and you need to be financially prepared for them.

Your emergency fund should be the very first savings account you open, and it should hold enough money to support you and your family for three to six months. Additionally, you should keep it in a money-market, or savings account that earns between 1% and 2%.

If you don’t have an emergency fund, this should be one of your top priorities.

Medical Fund

Medical expenses are not always emergencies. So it is a good idea to have a savings account with at least a few hundred dollars in it to cover things like routine doctor visits, and prescriptions.

You should not have to dip into your emergency fund every time you get the flu. So, go open a savings account and stash a few hundred dollars away for common medical expenses.

Gift And Party Fund

When my wife and I first started budgeting, we set aside money into a Christmas fund. The problem was, throughout the year we kept having to dip into it for birthdays and other celebrations. So, we just renamed it the ‘Gift and Party Fund’, and now we use it for every celebratory expense.

If you are going to organize your savings into multiple accounts, I highly recommend setting up a Gift and Party Fund. That way, when holidays and birthdays roll around, you have a stash of cash to pay for them.

Automotive Fund

One thing I know about cars is that they need consistent maintenance to run properly for a long time. Plus, expenses like registration, new tires, oil changes, and new brakes can get kind of pricey. They are not, however, emergencies.

Expenses for normal wear and tear on your vehicle should not come out of your emergency fund, which is why it makes sense to open a savings account for automotive expenses.

That said, if you unexpectedly blow out a tire on a 4-wheel drive car (which means you will have to buy an entirely new set of four), or your car randomly breaks down, you can use your emergency fund to get back on the road.

An automotive fund is there to help you save and pay for predictable expenses that come with car ownership.

Additionally, if you are saving to buy a new car, it is a good idea to keep the money in its own savings account. That way, when the time comes to buy your car, you can pay cash.

Vacation Fund

Everyone needs a vacation now and again. But hotels and airfare can cost a pretty penny, which is why you should have a savings account dedicated to vacations.

Think about it, if you put a few hundred bucks into a savings account every month (or paycheck) you could take a pretty awesome vacation every six months. This life is too short to just work all the time.

Set yourself up with a vacation fund and enjoy the wonders this world has to offer.

Home Savings Fund

Home ownership costs are like automotive expenses on steroids. So, if you own a home, you should definitely set up a savings account for them.

Whether you are paying for seasonal expenses like plants for a garden, a new snow blower, or new mower, or larger expenses like a new roof, you don’t want to dip into your emergency fund, or have to take on debt to pay for them.

If you set up a savings account for home expenses, you will not regret it.

Pet Savings Fund

With the exception of a goldfish in a small circular bowl, pets get pretty expensive. So, if you are a dog-person, or a cat-person, or any other kind of animal-person, preparing for random pet and vet bills should be high on your priority list.

Additionally, pet expenses should not come from your emergency fund. That is meant to protect you and your [human] family from major, unexpected expenses. And let’s be honest, the only thing predictable about pets is that they will be unpredictable.

So, prepare for the unpredictable by opening and consistently contributing to a savings account for pet expenses.

Final Thoughts

Having multiple savings accounts can help you keep your savings organized, track and stay focused on your financial goals, and protect your emergency fund. So, what are you waiting for?

If you really want to maximize your financial potential, you can start by organizing your savings into multiple accounts.

Zach Buchenau

About The Author:

Zach Buchenau is a self-proclaimed personal finance nerd. When he isn't writing about budgeting, getting out of debt, making extra money, and living a frugal life, you can find him building furniture, fly fishing, or developing websites. He is the co-founder of BeTheBudget, and Chipotle's most loyal customer.

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