Depending on where you keep your savings accounts, you can move money instantly within one bank or set up interbank transfers (which are usually free) to transfer funds to another bank.
Protecting yourself from yourself
After transferring money into a savings account designated for a specific purpose, you may experience some “pain” or guilt if you spend money from that account on luxury items or necessary expenses. This behavioral technique will help you stay on track.
Monitoring your progress
By having multiple savings accounts, you can monitor your progress toward various goals. When everything is mixed together, it becomes less clear where you stand on specific goals. This way, you can mark up each savings account with a goal in mind and better track your financial plan.
Building momentum
Success is motivating. If you see your account growing, you have positive reinforcement to continue your savings behavior. Working toward your goals is more enjoyable, and you are more likely to continue.
Reporting
Your account balance doesn’t lie. If you’ve decided to save for something and you’re not doing it, it’s important to understand what’s going on. Having another savings account will help you keep better track of your spending.
You need to recognize the problem and understand what is keeping you from making progress. Keeping track of your habits in multiple savings accounts will help you do this.
Reduce Your Spending
A dedicated savings account can help you budget for significant annual expenses. For example, if you pay your property taxes and homeowners insurance each year and don’t use an escrow account, you may want to top up your savings account each month to accumulate the necessary funds. By spreading the burden of annual expenses, you can avoid the upheaval during the year.
Yours, Mine, and Ours
If you’ve pooled your finances with your spouse or partner, but you both want some autonomy and privacy, it may make sense to open multiple savings accounts. Each of you can keep an individual account for things you want to spend without guilt. The other account could be a joint account for joint goals and expenses.
Discuss how you want to handle finances and develop a system that feels right for everyone.
Insure your savings
If you’re lucky enough to have significant cash savings, you can open savings accounts at different banks to leave your accounts below the FDIC insurance limits. The $250,000 limit is usually at the expense of the account for the institution, so keeping excess amounts at another institution helps you stay safe (make sure the Bank is under separate coverage). However, it would be possible to have more than $250,000 in one bank – ask bank staff for details.