When most of us think about savings accounts we just think of the standard one that comes when you open up a bank or credit union account. You have a saving account and a checking account. End of story. Right?
Wrong. Having multiple savings accounts can be a budget and financial lifesaver. Sure, you can have just one and just add to it without thinking about anything else. Or you could even have just one and keep a tally in a notebook or Excel spreadsheet of what all that money is being saved for. There is a much better way.
Most banks and credit unions allow you to have multiple savings accounts attached to one account. My institution calls them club accounts. Yours might call them sub-accounts or something different. Whatever they are called, they can make it so much easier for you to save money! Here are some reasons why you should have multiple savings accounts.
Separate emergency fund
I’ve talked about emergency funds before and why you should have them. Emergencies can happen at any time. Even new water heaters sometimes break and cars can break down or a pipe can burst in the basement. It’s important to have at least $1000 in an emergency fund (I personally keep $1000 but don’t suggest more than $2000 in this fund). Having this emergency money completely separate from any other savings is also important. It makes it harder to accidentally spend your emergency fund but also makes it easy to see how much you have for emergencies.
Easy to save for multiple things
I have one club account that I fill and empty every month. This account is strictly for paying my mortgage and health insurance premiums. I put a certain amount in from each paycheck so that it can’t be used for groceries, gas, bills, etc. I have another account that is for car repairs, yet another for house repairs, one for saving for Christmas, and so on. It is such a relief to know that there is $XX amount set aside for car or house repairs. This also keeps the emergency fund from being touched unless necessary.
You don’t need to have funds for just the necessary things, either. You can also have a club account for something fun you want like concert tickets or weekend away. It is even a great way to have a “fun fund” for each spouse instead of cash envelopes.
On top of the accounts I’ve already mentioned, we also have a club account just for sinking funds. Sinking funds are for those expenses you know about but don’t happen every month. These are things like car registration, Amazon Prime, dance/sports lessons, homeschool curriculum, car insurance if you pay every six months, etc. This account will be more fluid than the other savings accounts you use but just as important. An easy way to fill your sinking funds is to add up all those less than monthly expenses then divide the total by the number of paychecks received in a year, then put that amount into the sinking fund account every paycheck.
Easier to budget
In the past, I have kept most things in the main savings account that I got when I opened my savings and checking at my current bank. I used an Excel spreadsheet to help keep track of what was in each fund. About once a month, I’d discover my math was wrong and I’d have to fix it. It was frustrating and time-consuming. It is so, so much easier to budget and add to different funds when you have completely separate accounts for each fund. Since you are allowed quite a few sub-accounts, it’s pretty easy.
It’s also easier to check an account when out and about. Now, if you find a great deal on an item for the house, you can see if you have money in your house repair fund with mobile banking instead of having to remember your Excel spreadsheet. Not that I’ve ever had the problem…;)
Multiple savings accounts can go a long way towards helping you with your financial goals. By staying organized and keeping things easy, you’re more likely to achieve your goals and not accumulate more debt.