The Case for Multiple Savings Accounts

 

The bulletproof reasons why you need more than one savings account.

There’s a very straightforward case for multiple savings accounts, and it’s this: if you have more than one money goal, you need more than one savings account. (If you only have one money goal, feel free to skip this one entirely!) Here’s why, plus the four major benefits you’ll see with multiple savings accounts.

I’ll admit it: I’m a self-confessed savings account hoarder. Not only do I have more than one savings account, I actually have seven savings accounts.

I’ve got one account for each of my savings goals:

Before I went Full Crazy Personal Finance Lady, I had three savings accounts, total, and two of them were my RRSP and my TFSA (because without knowing anything else about either account, I opened both because “that’s what adults do.” Bad reasons, I know.)

The other savings account was my catch-all emergency fund, vacation fund, gift fund, new-running-shoes fund, and I think it even covered a new desk one time. You can see how well that worked out for my emergency fund here, but let’s just put it this way: the balance never really got beyond a certain point, and every time it did, something “came up.”

Because something always “comes up.” That’s just life, and that’s especially just life when you have one savings account taking care of all of your savings goals.

For a long time I kept at it, and figured if I just saved more, the balance would go up someday. It turns out, things kept coming up, and that balance remained pretty stuck at its natural $2,000 top balance. Anything above that somehow ended up getting spent – probably because I was so used to the account staying at that dollar amount.

It wasn’t until I switched to Tangerine and opened extra savings accounts that I saw any of my accounts creep past that $2,000 mark and stay there – which is an excellent thing, because my goal for my emergency fund is over $8,000, and let’s not even get into how much I’m trying to save for a house downpayment.

If you – like me – have multiple savings goals, even if they’re less than fully defined?

Your first step to achieving them should be separating them from each other. Whether it’s using a detailed tracking spreadsheet or straight-up getting more savings accounts, this is a must-do step.

Beyond the straight up benefit of actually saving my savings, here are four other benefits you’ll see if you have more than one savings account.

You Can Earn More Interest

With my savings accounts tidily organized to align with my different goals, I have a good idea of which ones might need to be tapped into quickly, and which ones need less frequent access. The accounts that I don’t need to touch that often – specifically my emergency fund and my house downpayment savings – are actually kept with an entirely different bank. I’ve got them stashed with EQ Bank, earning a guaranteed 2% interest until I need them.

You Can Set Distinct Goals

Not only do I know what my savings goals are for each account (here’s how I calculated my emergency fund goal and my dog’s emergency fund goal) my banks know them, too.

EQ Bank shows me the dollar amount I have left to reach my savings goals right in the dashboard view, so my savings goals are always top of mind when I log in.

Tangerine lets me set a savings goal for each account, and actually shows me a visual graph of when I’ll be able to reach it based on my current automatic contributions.

A look at my Tangerine savings goal tool, calculating when I'll have saved enough for my dog's emergency fund.

As you can see, I’m within striking distance of The Dog’s emergency fund being fully funded. I cannot wait.

You Can Spend Your Savings Appropriately

August was a spendy month for me. With vacation ringing in at over $1000, my savings rate took a hit, mainly because I withdrew from my vacation-and-gifts savings account to cover a big portion of the costs. (I may or may not have also used that account to cover an upcoming gift, but the recipient reads this blog, so shhhhh.)

That said, when I knew I’d need to dip into my savings, I knew exactly which account to pull from, and how much I had available.

I mean, it’s not called vacation-and-gifts savings for nothing.

You Can Stay Motivated

I’m not going to lie, when the timeline for (potentially, if all goes well) buying a house got shorter, my initial instinct was THROW ALL THE MONEY TOWARDS THE HOUSE GOAL.

money-out-window-gif

I wish I was kidding, or exaggerating.

It was only because I’ve got such clearly defined savings goals, that are all deeply important to me in their own way, that I was able to remain calm (or more realistically, become calm after the initial freakout) and continue with my preset contributions for all of my other accounts. It certainly helps that my goal for The Dog’s emergency fund is thisclose to being achieved, and that Tangerine’s nifty savings goal tool tells me I’m 94% of the way there. Once I’ve officially reached that goal, then and only then will I shift my monthly contributions from that account towards the house downpayment.

My current progress saving towards my dog's emergency fund.

So today, if I’ve convinced you that setting up at least one additional savings account is a good call to help you achieve what you want to with your money, I want you to actually do it. Go open just one additional savings account with your bank (shameless plug, it’s ridiculously easy to do with Tangerine, and the same goes for EQ Bank. What can I say, I like my banks.)

Do you have multiple savings accounts – or have you figured out how to make a single savings account work for you? I’d love to hear about it! (There must be other savings account hoarders out there. I can’t be the only one.)

PS. As of today, I’ve officially been tracking my spending for one full year. Stay tuned for all the gory details next week!

Desirae is on a mission to demystify and un-boring financial info for millennials, so that we can all save more money, spend on stuff that matters to us, and still have a latte or two along the way. Money is literally why we can have nice things, and Desirae is committed to helping make sure you know just enough to make the right calls for you. (She’s also committed to her expensive dog, her side hustle, and her retirement fund.)

30 Comments on “The Case for Multiple Savings Accounts”

  1. Ms Rustic Walks

    We just recently started using multiple savings accounts, and it’s made a huge difference. We thought we were so smart dumping all of our extra cash into an online savings account (with only 1% interest – I wish we could find 2%!). But then we’d withdraw from it for those little surprises and feel guilty about seeing the balance drop. It makes sense to break savings into different goals to track them more easily. It also helps to make it okay to withdraw from one account but not the other. No more guilt! And the savings will actually get spent how they should be!

    1. Desirae

      1% is still pretty baller these days! The 2% rate is actually down from 3%, which was their launch rate in January of this year – it’s gone down twice since then, and while it’s still *awesome*, I wouldn’t be surprised if it creeps down further, haha. And I’m so so glad to hear the multiple-account strategy is working as well for you as it is for me! It’s seriously been game-changing.

  2. Leigh

    Yes! I love multiple savings accounts when I have multiple goals. BF’s only goal is retirement (and hopefully buying into my condo!), so he has a checking account, a savings account where money eventually either goes to checking for large purchases or to Vanguard, and then Vanguard index funds in a regular account, a Roth IRA, and his 401(k). That’s it. Life is so much simpler when you’re not goal-oriented!

    1. Desirae

      EEEEEEE omg buying into your condo?! That’s such a big deal (even though I totally get it’s a someday-goal and not like, happening tomorrow!) The Boyfriend and I will likely be buying a new place together when he sells his current condo/townhouse, so I’m all over the logistics of buying together right now – there’s so much to learn! I will say, I love that his approach funnels money into Vanguard once it gets to a certain point / when there are no big purchases to account for. That’s discipline for sure, lol. (I’d be all… king sized bed anyone?)

  3. TJ

    I actually don’t utilize a savings account at all. I keep a buffer in my checking account, the rest goes right into investments. If I’m saving for a vacation, I’ll just let the buffer grow higher in my checking account. The checking account pays 0.7%, so it’s good enough.

    I did when I was saving for my condo seven years ago, but these days the difference between the interest rate on a savings account and my checking account is negligible.

    You could say that my bond funds are probably the closest thing I have to a saving account for a mid range goal, but they certainly have the possibility of going down in value.

    When I turn off my main income stream next year, I will definitely need to use a different strategy, and perhaps utilizing separate saving accounts will make it easier to stay on track. 🙂

    1. Desirae

      YOUR CHEQUING ACCOUNT PAYS 0.7%?! That’s it, you Americans get everything good when it comes to fintech. And banks.

      So interest to follow along with your strategy when you quit your fulltime gig!

      1. Leigh

        Even better is that the savings accounts at that credit union pay 1% too 🙂 So 0.65% on the checking account and 1% on the savings accounts! I can have all the savings accounts I want with a great rate attached to my checking account. (I’m not tempted to spend my savings, so I prefer it being attached to my checking account.)

        1. Desirae

          I’ve definitely still got a few attached to my chequing account, which I do like for the convenience! Especially for that vacation and gifts account, haha. I’d probably never touch my accounts either, but I do 100% like the extra 1% interest, lol.

  4. Ms. Montana

    We have use separate checking accounts for budgeting for years. Now that we are on a year long sabbatical, we are actually tracking all of our expenses. But we still keep all the little piles of money separate. I like being able to see that I have 2k for home repairs or 10k to cover our rentals expenses. Makes me feel like I have all our bases covered.

    1. Desirae

      Same here! I really like knowing that everything I can think of is covered – I’m such a planner like that, haha. I’m glad I’m not the only one!

      PS. LOVED your article about taking a year off work – I think that’s going to be a goal of mine in the future!!

  5. Julie @ Millennial Boss

    You’re on top of things with the dog fund and emergency fund! Good work! I didn’t have an emergency fund last year and paid for it big time when I had to get my appendix out. Also, never heard of Tangerine, I’ll have to look into it! I love the Canadian way of spelling checking account -> chequing account btw! It doesn’t look real typing it. I hope I spelled it right!

    1. Desirae

      Oh Julie I’m so sorry – I can’t even imagine having to cover necessary surgery like that, and I’m so sorry that it was an expense for you! (I know, socialist Canadian views, lol.) But seriously, that sucks but I’m glad your appendix isn’t causing any more problems! As for Tangerine, it’s what used to be ING Direct up here – Scotiabank bought it and rebranded it!

  6. Penny @ She Picks Up Pennies

    I’m sorry. I blacked out when I got to 2%. If I learn to spell checking the right way and toss in the occasional u in my words, can I make this sorcery happen? I found an account for 1% and felt like I won the savings-account lottery! I currently have three savings accounts, soon to be two. One is left over from our wedding savings account, and I’m too lazy to go to the bank and close it. I’ll keep one for my true emergency fund and one for everything else. Now that we’re hemorrhaging money with one Master’s program ending and mine starting, I might reconsider.

    1. Desirae

      Penny, don’t spook the 2% rate! It’ll run away! (No seriously though, it’s with a relatively new online bank in Canada, and they launched at – WAIT FOR IT – 3% interest in January. They had to start a waiting list because they couldn’t handle the demand.) It’s moved down twice since launch, but it’s still the best rate I can find, so oh well. I’m still a happy camper.

      And as someone who just went into a bank branch for the first time in YEARS, I feel you on the too-lazy-to-go-close-it thing. Not being able to do everything on a screen from my home with wine in hand? The worst. The absolute worst. (It was not actually that bad, they were pretty nice, and I now have a shiny US chequing account, but still.)

  7. Andrew

    I can honestly say that multiple accounts is the biggest wealth determining factor for us. It’s help keep our budget goals in line and done amazing things towards all of our life goals. My biggest advice is to make sure your are not paying service fees, we have nearly a dozen separate accounts and don’t pay fees (haven’t for 15 years) the saving in that alone is worth it!

    1. Desirae

      Yesss to the no-fee thing! I’m currently (very sadly) paying one fee to my RBC US Chequing account, to keep it open and use it to get paid from US clients, but otherwise no fees on any of my Canadian accounts!

  8. Leigh

    It appears that I can’t reply to your response directly? We agreed recently (at our anniversary dinner lol) that when we’re married, we would like to own whatever place we live in jointly 50/50. Whether that is my condo or a new place is still yet to be seen, but considering that we are buying new living room furniture to better utilize our current space, I think we’ll be here for a bit! He got a bit annoyed recently because I calculated that he would have enough to buy into my condo at the amount we agreed on within 1-2 years. I say annoyed because he extrapolated that to mean I thought we should get married in 2 years and he doesn’t want to think about that yet. MEN!

    Oh and don’t you worry, he certainly buys frivolous things with that overflow savings account too 😉 We are totally planning on a king size bed when it’s time to replace my mattress in another few years. And YAY for you two buying a place *together* – that is super exciting!!! I can’t wait to hear more about it as it unfolds. We both dislike moving enough and I love my condo, so we figure we’ll stay put for another 5 years at least.

  9. Financial Samurai

    I’m in total agreement. I love saving for specific goals. It makes saving so much more fun and meaningful!

    Right now, I’m trying to save for a dream house in a couple years, anticipating the market will fade. We shall see!

    Sam

    1. Desirae

      Thanks Sam – and I remember reading about your Hawaii aspirations, which sounds *amazing.* Can’t wait to read that purchase recap post someday!

  10. Sarah @ Couple of Sense

    I think the multiple savings accounts works if you need to have the physical separation of the money. I’m just kind of lazy to have so many different accounts. Outside the retirement savings I share 1 chequing and 1 savings account with my husband. We have a detailed budget that breaks out the money that we have in each of the accounts. So in our excel budget we know that of the total amount we have X saving for vacation, Y for the kitten and Z for a future car, etc. We don’t get tempted by the massive number since we break it out in so much detail.

    But I agree Tangerine is super easy to open and use. The tracking of the goals is an awesome feature for motivation. That is where our TFSA and business stuff is located and it’s been super great to bank with them.

    1. Desirae

      Hahaha not lazy at all – the effort you put into that Excel spreadsheet sounds like exactly what I would be too lazy to maintain, which is why multiple accounts works so well for me!

      And I actually didn’t know Tangerine had business accounts! Good to know!

  11. Steve Reed

    I used to have too many bank accounts and recently cut down to three: Capital One 360 (online, high interest), Bank of the West (local branch to see a teller or get cash) and Charles Schwab (free to use any ATM worldwide, they reimburse fees). Used to toy with a few investment accounts: Wealthfront, Betterment but now all investments are with Vanguard through a brokerage account, IRA or 401k at work.

    Different accounts for different goals is a great way to go!

    1. Desirae

      I feel like eventually I’ll need to simplify, maybe once I have fewer goals, lol. I’ve just added a US account too, in order to receive deposits from clients there, which makes everything a bit more complicated – it’s going to be a fun tax season, haha.

  12. NZ Muse

    I definitely love multiple accounts. How else would I keep track of everything (I hate spreadsheets!) There’s no cost to me to have separate accounts for as many purposes as I want, so I do!

  13. Jaymee @ Smart Woman

    Omg as soon as I started using multiple savings accounts for each of my goals, there was no way I’m going back! Partly because I like being organized and having things be in their own defined place xD But mostly because it was extremely motivating – like seeing my dreams slowly come to life with each dollar you know?

    I would recommend everyone do the same! Oh and I love EQ Bank also – they’re just a tad less accessible than my Tangerine accounts which make it great because it’s harder for me to dip into my goals funds.

    1. Desirae

      Right?! I could not handle having it all in the same account anymore, I’m pretty sure I would black out and go on a shopping spree. And I’m in the exact same boat with my account set ups – the EQ stuff is so much harder to access (relatively speaking) which is a great barrier to have in place so I’m not tempted to just… steal a little bit here and there from my house fund as it grows, lol.

  14. Jen

    Emergency Fund
    1st Kids savings account
    2nd kids savings account
    3rd kids savings account
    House Fund
    Car Fund (car insurance, tax, and repairs)

    and I believe that is it!

    I find having multiple accounts just makes things simpler. When we only had one account I would allocate different amounts of money to different goals every other day.

    1. Desirae

      Same here! It seems complicated, but really it’s all about simplicity for me too.

      And this is a much needed reminder that sooner than later, I’ll need a car fund too. My poor Little Car isn’t getting any younger.

Leave a Reply

Your email address will not be published. Required fields are marked *