3 reasons you should have more than one savings account

When it comes to savings accounts, sometimes more is better.

With a single savings account, you might have trouble managing all of your goals in one place, or you might be too tempted to spend from that account.

Those problems won’t worry you when you have multiple accounts. And while an individual bank or financial institution may limit how many savings accounts you can have with them, there’s no limit to how many accounts you can have at different places.

When you look for the right savings account, it’s important to consider fees, the annual percentage yield or APY (the amount of interest an account earns in a year), and functionality. Several of CNBC Select’s favorite high-yield savings accounts offer high interest rates with minimal fees — Synchrony Bank’s High Yield Savings, for example, doesn’t require a minimum deposit or balance and has no monthly fees. SoFi’s Checking and Savings is another option that ranked highly for its welcome bonus and strong APY with a direct deposit. 

Here’s what else you need to know if you’re considering opening another savings account, and several scenarios where it might be helpful to have more than one.

If you’re having trouble keeping track of your different savings goals, it may be time to open another savings account. 

“Having multiple savings accounts allows you to visualize certain goals,” says Andrea Woroch, a consumer and budgeting expert based in California. “You could create different savings accounts for different goals, and then there’s no mudding of your savings.” 

Using a separate savings account, or one that allows you to have “buckets” for different goals like Ally Bank’s Online Savings Account, could help keep your savings more organized. These buckets are all within the same savings account, but can still help you visualize how much progress you’ve made toward each of your goals.

An emergency fund is a pool of cash saved for unforeseen expenses, such as home repairs or a job loss, and is generally equal to three to six months’ worth of your expenses. It’s meant to be kept accessible in an emergency. 

If you’re often tempted to dip into that emergency fund, it might be time to open another savings account at a bank or financial institution that’s separate from your checking account or other accounts that you regularly monitor.

“If it’s not at the same bank as your checking account, it’s not going to be as easy to dip into,” Woroch says. “It’s still liquid and you can access it in an emergency, but it just makes it a little harder to touch on a daily basis when you feel a temptation to buy something that you might not be able to cover otherwise.” 

By keeping your emergency fund out of sight and out of mind, you may be able to better maintain it for when it’s needed, and avoid the temptation to spend it. 

Federal Deposit Insurance Corporation (FDIC) coverage is limited to $250,000 per person, per account ownership category, and per insured bank. Having multiple savings accounts across different banks or fintechs is one way to get more than $250,000 in FDIC protection.

Some institutions will help do this work for you, taking deposits and distributing them across several partner banks. Wealthfront uses this model for its Cash Accounts to offer up to $3 million for individual accounts. Betterment, another fintech company, offers up to $2 million in coverage for individual Cash Reserve accounts by distributing deposits to partner banks. 

While this can be useful for those with large savings account balances, you’ll need to double-check that the banks the fintech company works with aren’t ones where you currently bank. Since you only get $250,000 of FDIC coverage at each institution, any deposits you already have with a bank will count toward that limit. Check your statements to see where your cash is deposited to ensure you’ll get the full coverage amount.

Having multiple savings accounts could help you keep your money covered by FDIC insurance, keep your emergency fund safe from spending, and help you better track your goals. To get the best savings account, consider the APY, functionality of the account, and opt for a fee-free account.

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