Some savers retain To put money aside for various purposes in many savings accounts, such as paying down debt, building a down payment for a home, or guarding for emergencies.
Generally, the bank does not have rules about how many savings accounts a consumer can have. Some people like to put their money in different accounts for different goals. Maintaining an account for a different purpose encourages some people to save more and does not withdraw their money from one for a large purchase. rainy day.
Greg McBride, chief financial analyst at Bankrate, says, “You can keep the money you want to save for next year’s holiday or new car purchases, separate from your emergency fund, and keeping those savings accounts easier to track those objectives It is possible.” A financial data company.
How do you set up multiple savings accounts?
Consumers who want to deposit their savings and who have more than one account, should probably aim to open in the same bank credit Union For convenience.
Sonoma Wealth Advisors managing director Daren Blonsky said open your savings accounts at a financial institution and offer competitive rates and keep your assets there.
“Many large low-cost investment institutions now have full banking capabilities, so you can centralize your financial life,” he says. “Charles Schwab, For example, is a large banking institution and has a complete lineup of banking solutions in addition to their retirement tools. “
One strategy is to label your individual savings accounts to keep goals separate for them. This behavior trick helps people avoid using savings for emergencies and instead puts money in an account for payment in a house or car or for large purchases like a major appliance.
“Whether you use one bank or spread accounts across multiple banks depends on how much you value the facility versus the rate of return,” McBride says. “It is certainly convenient to have everything under one roof, while accounts at various banks can allow you to transfer your money between banks to capture the best yield.”
The best way to fund a savings account is to set it on regular deposits, Blonsky says.
“If you automate the process, it is less to think about, and you will be more consistent,” he says.
You can make automatic transfers from your checking account to savings accounts set up to fund your goals, such as holiday funds or holiday spending funds, McBride says.
How many savings accounts should you have?
How many savings accounts a consumer should have depends on the individual’s goals and how often they save. Automating savings directly from a paycheck can help speed up the savings process. Some people prefer to have a savings account allocated for a down payment for a rainy day or a mortgage separately for the holiday.
“One rule of thumb is to have a savings account for each of your financial goals,” says Ivan Kulak, co-founder of Polaris Portfolio, a financial planning company.
“Even if you’re just starting out, be sure to make frequent transfers to build your balance over time,” he says.
Although interest rates are lower in 2021 than in previous years, as the Federal Reserve has been keeping federal rates low – and has been planning to do so for years – many consumers must still have more than one account so that they can save more. To motivate to do.
“Having multiple savings accounts is not necessarily where the interest rates are,” McBride says. “Don’t get bogged down by fast savings for risky investments simply because interest rates are low. The money in your emergency fund is designed not to grow into luxurious funds, but to save you from destroying high-cost debt or other assets. . Unplanned expenses are generated. “
They say that consumers should be aware of the minimum balance expected by the bank and the consequences such as paying a lower yield or fee. Many nationally available online savings accounts do not require a minimum deposit amount, setting a minimum balance or a fee charge.
Federal Regulation D limits consumers to six withdrawals each month, so keep an eye on each time you transfer funds from your savings account to pay bills or you may face a fee.
Kulak says that it is a good idea to have multiple savings accounts for each of your savings goals.
“Goal-based savings provide a simple and efficient way to reach your financial goals,” he says. “By creating a separate savings account for each goal, it is easier to track your progress, automate your deposits and hold yourself accountable. Fortunately, most banks and credit unions have digitally opened and saved many savings. Funding accounts has made it easier. ”
Blonski says some banks are still offering competitive interest rates, although they are still low.
Saving Money in an ETF
With high-yield savings accounts yielding less than 1%, investors can allocate some of their money to one exchange traded fund Since they trade like stocks, they make a liquid investment. You can buy and sell shares in ETFs through a bank or brokerage account.
Despite low-interest rate environment, fixed-income investments are still yielding good yields. JPMorgan Yield for Tiny Income ETF (Ticker: JPST) Is more than 2% for the previous year, 0.6%, much better than certificates of deposit and savings accounts, Blonski says.
However, do not forget that ETF cannot guarantee you that you will not lose money.
Kulak says, “Although savers can get higher yields, it’s important to remember that investment products come with an increased risk. Unlike savings accounts that are insured, investment products risk default. . … In addition to the risk of default, there. Liquidity risk, which is the risk that you may not be able to buy or sell your investment quickly. “
McBride says consumers should always keep their investment and emergency funds separate.
“The emergency fund should be free from any risk of loss, ideally insured and available for immediate evacuation,” he says. “Having some extra cash in your brokerage is a great way to capitalize on a sell-off in a money fund that, too, should be considered separately – and kept separate from your emergency savings.”
Bank for multiple savings accounts
Here are six banks and credit unions that offer high interest rates with no monthly fees or little or no minimum deposits and where you can easily transfer your money from a savings account to a checking account online or through an app. can do.
- Associate bank Provides a savings account with no monthly fees and minimum balance requirements, and it pays 0.5% on all balances. Its checking account does not charge fees, and checks are free.
- Can become a member of Alliant Credit Union Once it donates $ 5 to Foster Care on your behalf for success. The savings account pays 0.55%. Alliant Credit Union requires a minimum balance of $ 5 to keep your savings account open and an average minimum balance of $ 100 to earn interest.
- American Express Offers a savings account with no monthly fees. It has no minimum balance requirement and pays 0.5% on all balances.
- Search the bank Provides a savings account with no monthly fees and no minimum balance requirements, and it pays 0.5% on all balances.
- Marcus by Goldman Sachs One offers Online savings account with no fees or minimum deposit amount. It offers 0.5% on deposits.
- Synchronized bank No minimum balance is required to open an account and pays 0.6% on all balances.