Most families have only one savings account. If you have all your family savings in one account, it may become hard to keep track of your investment goals. Mixing the college tuition savings, with the future house savings, with the money for a future family trip and the emergency fund can make you lose track of the situation. Eventually, you may not achieve any of these family goals, because the money is all thrown in one basket. Instead, have you thought about having more than one family savings account?
It can sound even more complex to keep an eye on your financial life if your savings are in multiple different places. However, it is often easier to keep on the right path to your financial goals with more than one savings account. Statistically, most families have trouble making and keeping to a budget. Thus, the system of having only one savings account, which most families follow, may not be the ideal one for everyone.
If you are facing challenges trying to save your money and are open to considering opening more than one savings account for your family, this article can help you. It will show you why having more than one savings account is an interesting option, explain how you can divide your savings, and how to monitor all of it.
When you have only one savings account for your family, the priorities may become unclear. On top of that, you might not be benefiting from advantages offered by new and different savings accounts. And having multiple savings accounts doesn’t impact your credit, so there is no reason for not doing it if it can be helpful. Thus, here are the main reasons to consider having more than one savings account for your family:
It may be easy to follow one savings account, but it can be challenging to manage your various goals. For example, your family can have a savings account for the following three reasons:
These are, respectively, long-term, medium-term, and safety family goals. If the savings for all of these are in the same account, it can be tempting to dig into your emergency funds in exchange for some extra vacation days with your partner and kids. Or you can overspend a month with your emergency funds and delay even more your dream home.
A single savings account makes it harder to see how much you set aside for each goal. That is why having targeted savings accounts can help you focus more on your goals. If you set a different savings account for each of these goals, the progress towards each goal will be easily tracked by looking at the account's balance. Clear-targeted savings goals incentivize good behaviors. This is because they will give you reasons to monitor your spending patterns. Thus, separating your savings accounts per goal will help you and your family keep track of the progress towards the goals while creating clearer spending boundaries.
When you send all your extra money to a single savings account, it becomes more tempting to spend it. One single bank transfer and you can access all that money that you have been accumulating. A small transfer won’t make much of a difference right? Not Really. This is how you will always be stepping back from what you managed to save so far for your family.
By spreading your money in more than one savings account, each savings account will have a lower balance. This set makes it harder to feel like you have extra money you can afford to spend. Having multiple savings accounts also adds barriers to spending your money, especially if you open them in different banks. Before you can use these savings, you may have to make transfers from each of the accounts to your checking account. This process can even take some days since you will have to wait for the transfers to be completed. These extra steps and the sensation of having less money make it easier to avoid spending your savings and keep you on the right path towards meeting your family’s goals.
A common strategy used by banks to attract new customers is to offer bonuses to people who open new accounts. Generally, to receive a bonus from a savings account, you need to open an account and keep a certain balance for a period of time. These bonuses can be worth hundreds of dollars, so they’re worth looking for if you have enough money to do it. If you open savings accounts at different banks, you can earn more than one of these bonuses. If you do that, you can accelerate your progress towards your savings goals.
When it comes to investing or saving your family’s money, it is always wise to distribute it in more than one place. By doing so, if something happened to one of your banks or financial institutions, your family still has a safety net somewhere else. Therefore, having more than one family savings account is a smart decision to be financially safer.
Another great advantage of having various target savings accounts for your family is that you will be able to find the best type of accounts available for each goal. For example, if you save money for a long-term goal, such as buying a house, you can use an online savings account. This type of account usually offers higher interest rates than traditional savings accounts. At the same time, you can keep an emergency fund at a credit union savings account, which you can access a little easier in case your family needs it. Then, you can save money for your kids’ college at a 529 college savings plan, which offers tax benefits for education. This way, you take advantage of all the savings account models that best fit your various needs and goals.
Of course, having more than one financial account can become overwhelming if you don’t organize yourself. It is important to keep track of all your different accounts, including savings and checking accounts. How much is where, what is each interest rate, and whether you pay any fees are vital information to know and control. There are some tips that can assist you on that:
Look for Accounts Without Fees. Something that will make your life way easier is to choose savings accounts that don’t charge you any fees, or that at least have a very simple – and preferably low – fee system. Online savings accounts usually don’t charge any fee. Therefore, it may be interesting to check those. This will save you the stress of keeping track of each account’s monthly fee and minimum balance.
Use Apps or Spreadsheets. Using a tool to assist you in the control of your money is a good idea, even if your family has only one savings account. If you have more than one, it is an even better idea. There are plenty of apps available that focus on financial organization. Otherwise, you can also use spreadsheets to manage your money.
Automate Your Savings. Multiple savings accounts are a great way to focus on your family’s goals and avoid misspending. But if you get distracted, you can forget you have to send money to all of them every month. An excellent and simple solution is to create automated transfers from your main account to keep your savings accounts growing. Setting up regular transfers from your checking account to your savings accounts is one of the easiest ways to transform saving money into a habit. Like that you are also “obligated” to stay in the budget because the money won’t be in your checking account.
This will depend on many factors, including your personal preferences and goals. What is wise is to don’t mix your emergency fund, vacation and leisure savings, and your more long-term savings. They are savings for completely different occasions and financial goals that will take distant amounts of time to be achieved, while also being used on distinct occasions. Due to that, mixing them can become very confusing.
It is also interesting to evaluate if there is a specific savings account for a particular goal of your family. For example, as mentioned earlier, 529 college savings plans are an ideal type of savings account if your goal is saving for your kid’s college. Also, if you are organized enough to have only one bank account and perfectly manage your financial goals like that, great! There is no one right answer to how many savings bank accounts your family should have. The goal is to be able to achieve the family’s goals while being prepared for unexpected expenses.