The Pros and Cons of Multiple Savings Accounts

While having a single savings account can provide a solid foundation for building wealth, it’s not always the best strategy when it comes to growing your cash. Depending on your spending and saving habits, having multiple accounts can make it easier to increase your savings. Explore the benefits and drawbacks to having multiple savings accounts to see if this option is right for you.

Advantage: Protect your savings from yourself

If you frequently find yourself tapping into your savings account for non-emergency spending, having multiple savings funds is a wise strategy. Money Crashers contributor Michele Lerner recommends having one savings account as your emergency fund that’s easily accessible. Then, store the remainder of your savings in multiple accounts that are a bit more challenging to access, as Erika Torres from Ready for Zero blog shared with Business Insider. Try going with an account that imposes an early withdrawal fee. You can also sign up for one that has strict limits on how many withdrawals you can make per month, as contributor Ben Todd suggests.

Advantage: Contribute toward multiple goals

Base each savings account on a short- or long-term goal. Todd suggests a range of different goals you might want to make an individual savings account for, such as your kid’s college fund or an upcoming major expense. Having your savings allocated toward multiple goals allows you to easily monitor your progress toward reaching them. As Lerner articulates, if you have a down payment, summer vacation and three months’ worth of income funds, you simply have to open all three accounts to visually see how close you are to your target amounts.

Advantage: Try out different financial institutions

Lerner also mentions that having numerous savings accounts is a great way to test the services of different financial institutions. Whether you open your account with a brick-and-mortar business or an online one, this strategy can give you insight into which benefits and incentives you most want in a financial institution.

Advantage: Extra security in case of failure

Yet another perk of having multiple accounts is that it provides more security in the rare chance that one of your financial institutions fails. As Lerner points out, even though FDIC insurance will reimburse you if a business goes under, it can take a while for you to access your funds again. Investing your cash in different savings accounts with multiple institutions will help protect you from this unfortunate (and inconvenient) scenario.

Disadvantage: Harder to meet the minimum balance requirements

Lerner warns that some savings accounts have a minimum balance they require you to maintain to earn interest. If your overall savings amount is dispersed among a variety of accounts, meeting this minimum balance can prove challenging.

Disadvantage: More confusing than having a single savings account

Having different savings accounts sometimes means you’ll have to decide how to allocate unexpected bonuses from work or occasional income such as birthday money or cash gleaned from a side job. Not everyone wants the stress of having to apportion unexpected income, Lerner points out. Having numerous accounts also makes automatic transfers a bit more muddled, since you’ll have to set up automatic transfers for separate accounts instead of just one.

Having multiple savings accounts comes with its own set of pros and cons. By familiarizing yourself with the advantages and disadvantages of this saving strategy, you can confidently make the best choice for your personal finances.


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