Savings accounts play an extremely important role in personal finance. And with so many different reasons to save money, it can be beneficial to break your savings into multiple accounts. But, if you’ve never done so, it’s normal to find yourself asking the following question: how many savings accounts can I have?
Put simply, there is no limit to the number of savings accounts you can have. In fact, splitting your money between multiple accounts can be a great way to keep your savings separate and organized. For instance, you could designate one account for emergency savings, a second account for home savings, and a third account for automotive savings.
By setting up multiple savings accounts, and assigning a specific purpose to each one, you can fine-tune your financial life, and make sure you are prepared for just about anything life can throw at you.
But, that begs the question, how many savings accounts should you have?
Well, that’s exactly what I’m going to cover in the rest of this article.
Let’s dive in!
7 Savings Accounts You Should Have (And Why)
In the following sections, I am going to cover a variety of savings accounts you should set up if you want to keep your financial life organized. But, before you set up any of these accounts, I want to make sure you set up the best savings accounts possible.
You see, one of the most important benefits of a savings account is the interest that you can earn on your money. And while every savings account offers some sort of interest, some offer much better rates than others. Seriously, this can add up to hundreds of dollars per year.
If you’re looking for some savings account guidance, here at Be The Budget, we recommend the CIT Savings Builder. With a low opening deposit, online convenience, and a nice interest rate, it is one of our all-time favorite savings accounts.
Ok, now that we’ve gone over the importance of opening a savings account with a decent interest rate, let’s get into the different savings accounts you should have.
1. Emergency Savings Account
First and foremost, you should set up a savings account for emergency expenses. You see, I don’t care who you are, how much money you make, how nice of a car you drive, or how healthy you are, at some point, you are going to run into a financial emergency. And it’s critical that you prepare for it.
As a rule of thumb, at any one time, you should have at least 3 to 6 months worth of your living expenses sitting in your emergency fund. I can’t stress this enough!
Think of it this way, if you were to suddenly lose your job, would you have enough money in savings to cover your expenses for a couple months until you could find a new one? If not, you need to set up a savings account specifically for your emergency fund right away, and make it your number one financial priority to fill it with a nice pile of cash.
Saving for emergencies might not be the most fun financial task, but if a day should come when you need to rely on savings to pay your bills, you will be extremely grateful you did!
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2. Travel Savings Account
If you like to take vacations, or explore the world, then you should set up a savings account specifically for this purpose. In my opinion, this is one of the more fun savings accounts you can open, because you get to spend it on fun and relaxation.
Additionally, if you have a savings account specifically for travel, you can spend it guilt-free when you are on vacation. Whereas, if you don’t separate your travel funds from your other savings, it can be hard to justify spending it on vacations, because it feels like you are pulling it from other important areas of your financial life.
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3. Automotive Savings Account
It’s no secret that when you own a car — assuming you want it to last a long time — you are going to have to pay for some upkeep and maintenance. That means oil changes every few thousand miles, tire rotations, new tires, alignments, and so much more. And since cars come with so many expenses, it is important to save for them.
Additionally, if you have any desire to buy a car in the future, then you should be saving to pay cash for it. And it’s best to have a specific place to put those savings.
That’s why you should consider opening a savings account specifically for automotive expenses.
4. Home Savings Account
Similar to automotive savings, if you own a home, there are all sorts of expenses that you will need to pay for. Between regular upkeep and maintenance, to big projects like landscaping your backyard and home remodels, setting aside some money every month is a great idea. And if you’re going to do that, it’s a good idea to break these funds into their own separate account.
Think about it like this, if you have one big pile of savings that’s meant to cover everything from home expenses to emergencies, and you decide to remodel your kitchen, it would be a little too easy to dip into your emergency savings in order to pay for the upgraded countertops and cabinetry.
In other words, if you want to make sure your home expenses stay within reason, and avoid stealing from other areas of your financial life, a home savings account is a great idea.
5. Tax Savings Account (If You’re Self-Employed)
If you are self-employed, then setting money aside for taxes should be one of your highest priorities. And seriously, you do not want to mingle these funds with any other areas of your business.
Taxes, while they may be a pain in the butt to pay, are non-negotiable. And you do not want the IRS to come knocking on your door asking for them. So, if you own a business, or you are paid as a 1099 (which means you have to take care of all your taxes on your own), then you should definitely set up a tax savings account.
This is what I refer to as a financial headache and stress reducer.
6. Major Life Events Savings Account
Throughout life, there are all sorts of big purchases and events that you will need to pay for. I’m talking about weddings, new babies, graduations, and so much more. And while you might not know exactly when in the future these events will take place, it is important to start preparing for them early.
For instance, my wife and I just had a baby girl, which means we will probably be paying for a wedding in the next 20 to 30 years. Now, we aren’t quite sure when that day will come (or how many boyfriends I am going to have to beat up before she finds Mr. Right), but if we open a savings account and start piling up some money for her wedding now, it will take a lot of the financial stress out of her big day.
But like weddings, there are quite a few other events and celebrations for which you should save. And if you have a dedicated savings account for the really big ones, it will make them much more enjoyable.
7. Holiday, Gift and Party Savings Account
Around here, we love pretty much any holiday that comes our way. After all, if you have the chance to celebrate something, why wouldn’t you?
But here’s the thing, with every holiday, birthday, party, or celebration of any kind, there are usually a few accompanying expenses. And it is in your best financial interest to set money aside, specifically for these expenses.
That’s why, if you want to be financially prepared, you should set yourself up with a savings account specifically for holidays, gifts and parties, and contribute a little bit of money to it every month. Trust me, throughout the year, you will have to pay for all sorts of expenses like this, and having this fund will make your life a lot easier!
So, how many savings accounts do you have? Also, what are they for, and how long have you broken your savings into multiple accounts? Be sure to comment below.