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Do You Need Multiple Savings Accounts?

Multiple savings accounts are necessary for financial wellness.

Having multiple savings accounts is essential to reaching your financial goals. Most people have a checking account and maybe a savings as well. You deposit money into your checking account and then transfer to your savings. Sounds simple enough, right? While this system can work, multiple accounts are the way to go if the goal is to become more organized.

Think of it this way, you can throw all of your clothes in one drawer, but most prefer to have clothes separated by type. Your money and savings, in particular, should not be an exception. How many accounts are necessary depends on each family’s unique situation, but some account types are worth considering.

Emergency fund.

There are many opinions on just how much is needed for an emergency fund. One idea is to have an emergency fund of $1000 and work on eliminating debt. That works great if your emergency is less than $1000, and you are sure that you’ll never lose your job.

Many thought they had job security found out quickly during the pandemic that no jobs offer 100% security. Make it your goal to have at least six months of living expenses in an emergency savings account. Of course, this will not happen quickly, but make savings a priority. Having that sort of cushion will provide you with a bit of peace should your income stop short or long term. Building a healthy emergency savings can be overwhelming when living paycheck to paycheck when there just isn’t much wiggle room in the budget. One way to reach this goal is to have a side hustle or second job where all of that money goes towards this emergency fund, leaving your budget for the necessary everyday expenses. It’s advisable to have this account accessible, but not too readily available. Using a different bank than the one you have your checking account keeps the temptation from dipping into this account for wants vs. needs.


This type of account should be a fundamental part of a budget for people whose income fluctuates monthly. When designing a budget, it’s advisable to work with an average salary. When the pay is higher one month, the money beyond what you’ve budgeted for goes into this account. This account can supplement the deficit to keep your budget functioning as you have planned in the months where the income is lower.

Known Large Expenses Account

When designing a budget, there are always known significant expenses. To avoid a big hit to the budget every year when your property taxes or car registration comes due, consider having a known significant bills account. If you know that you will have those expensive months in advance, keep the budget consistent. Having the money for the expenses in the checking account all year can be too tempting to overspend. It may seem as if your account is in better shape, until that bill comes due. Figure out what you will pay annually for those significant expenses and automatically transfer it into this account. Having a large expense savings account is a simple way to save for vacations or holiday gifts. Figure out your costs and transfer that money monthly.  

Retirement Savings

You don’t have to have an employer to save for retirement. If you are among those fortunate to have an employer-sponsored retirement plan, take full advantage of that. It does not matter if you don’t plan to be at your current position forever; you can always bring your account with you. This account is a no brainer. You won’t even see the money coming out, because you’ve already deposited into an account before you receive your paycheck.

For the non-working spouse, take advantage of a spousal IRA. Spousal IRAs are subject to restrictions and annual limits. Living without a paycheck is hard, but that is what retirement means. Retirement is living for the remainder of your life without your current paycheck, so keep that in mind when you think about skipping out on contributions.

IRAs, 401k, 403b can be challenging to understand. When making decisions on moving or transferring money out of this type of account, it is best to consult with a retirement specialist who has years of training and understands how this works. A wrong move, whether intentional or not, can have significant consequences.

Medical Savings

For those who have HSA qualified plans, take full advantage of the maximum annual contributions. For non-qualified health insurance plans, it’s best to aim for an account to cover your family’s maximum out of pocket. An accidental injury policy is an excellent safety net if you do not have a fully funded medical expense savings account. In 2020, the federal maximum limit for out-of-pocket maximum on ACA qualified health insurance is $8150/person capped at two people per family.

Don’t forget your furry family members, either. Medical expenses for pets can be significant and can easily reach thousands of dollars. Unfortunately, financial euthanasia is a genuine predicament many people face. Pet insurance can offset this cost for a healthy pet that can qualify. Don’t forget the pets when thinking of savings.

For those who want to categorize their savings accounts further, there’s nothing wrong with having multiple accounts. The recommendation is to have savings accounts spread across different banks and vehicles. For easy to get to the money, your bank’s savings account works great. For the long term, you may want to consider an online bank or a money market account. Often these types will have a better interest rate. Banks can serve a purpose, but keep in mind that banks will only insure each account up to $250,000 through the FDIC. If you need assistance in choosing the best vehicle to reach your goals, don’t hesitate to reach out to a professional. Always better to ask for advice than to risk making a decision that can cost you financially.