While the idea of multiple savings accounts may sound redundant, it makes a lot of sense when you consider how individual accounts can help keep financial goals from overshadowing each other. For example, you may want to open one savings account that serves only as an emergency fund, another to save for holiday purchases or a third to pay for a vacation. (Have you tacked up that Hawaii photo yet?)
Note that the money in these accounts may not keep up with inflation, so it’s best to use them for shorter-term goals or in instances where you’ll want immediate access to the funds.
Still – and here’s the good part – the money isn’t quite as easy to access as cash in your wallet. There may even be some healthy guilt involved in touching an account for potentially frivolous reasons when, after all, you’ve dedicated it for a special purpose beyond your immediate gratification. To remind you of this, it may even make sense to create these purpose-driven accounts in a bank or credit union other than your main financial institution. To avoid temptation, don’t carry any debit cards for these accounts, which might tempt you to tap them instead of your everyday-use account.
With kids, opening separate accounts can head off inevitable squabbles about whom the money in a single account belongs to. And as siblings have a penchant for comparing everything, multiple accounts help you to keep close tabs on making things equal.
While creating multiple savings accounts can provide organization and motivation to fund your pet projects, be careful not to spread yourself too thin. One separate account may be enough to use for one goal and then reuse for another once its mission is accomplished. Begin with the end in mind, and ask yourself how many accounts it makes sense for you to manage without becoming overwhelmed or your repositories underfunded.