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A few years ago, I was at a friend’s going away party and she pulled me over to meet her mom. When she introduced me, her mom instantly replied, “Oh, you’re the one who helped Lauren set up all of her savings accounts!”

Yep. I’m that friend.

A few years earlier, it had somehow come up in a conversation with Lauren that I like to have a lot of savings accounts. A few minutes later, I was showing her exactly what I did to set them up and how I was going to use them in the future. I confessed that the day I realized I could have as many savings accounts as my fastidious little heart desired was one of the best days of my life.


How many savings accounts should you have?

There’s no right or wrong answer here. If you work well with one account, have one.

Me? I need more. A lot more. Why? I love saving for very specific goals. To me, money is meaningless unless you have goals that excite you. Having a savings account to match each goal makes the process of saving that much easier for me.

Here’s why:

It makes managing your cash flow easier

You know those bills that need to be paid just once or twice a year, like property taxes or insurance? Having a separate savings account where you deposit money monthly means that you’ll have cash on hand each time those bills are due. Crisis averted.

You can set and monitor distinct goals

Saving up for a house? A dream vacation? A three- to six-month stash of emergency cash?

You can set a savings account for each of these goals. With some banks, you can even name the account to match the goal (ex: South Africa Summer 2020) and set a goal amount. You can easily log in and see your progress toward specific goals you’ve set.

It helps you stay motivated

And really, that’s the name of the game when it comes to making smart money choices. If you can see yourself making progress toward your goals, your money has meaning. That meaning has made all the difference to me in making smart choices.

Think about it this way: Given the choice between a morning latte or putting a few dollars toward an arbitrary numerical goal, the caffeine-boost sounds like more fun. But given the choice between a morning latte on your way to the office or saving for a morning espresso on your Paris vacation? The option to save sounds much more appealing.


Our roster of savings accounts:

As our goals change, our savings accounts change to match. Here’s what we currently have set up:

    • Emergency Fund: We have five months worth of expenses saved in here.
    • Vacation Savings: We’re currently expats living in Europe, and between trips exploring new countries over here and trips home to visit family, this account gets a lot of use.
    • Property Tax Savings: We make monthly deposits into this account so that when our bi-annual property tax bill comes around, we can pay it easily.
    • House Savings: We have plans to update our nearly 100-year-old home, and this account is where we save for those dreams.
    • Business Savings: This one is mainly just to pay the tax man or anything big that I know is coming up.
    • Car Savings: We’re going to need a new car eventually, so we have been slowly saving for that so we can pay in cash.
    • The F-it Fund: This account can buy us our freedom. We think of it as the safety net if we need to leave our jobs or change our living situation. We’re also using it as a cushion that we’re building to start a future business. This is my favorite account.
    • College Fund: Our newest savings account is Henry’s college fund. I walk through the process of how we found the type of account for us and decided how much to contribute in this post.

 

Where should you keep your savings?

There is where things can get a little confusing. Do you keep all of this money in a high-yield savings account? Or should you use some of it to invest and make sure it’s working for you?

General wisdom says that your emergency fund—and anything else that you might need in the short term—should be kept in an easily accessible savings account. Depending on how much you’re saving, you might be frustrated keeping so much sitting in a savings account that’s not earning very much interest. If you’re thinking of straying from the standard advice of keeping it locked in a less-accessible account, consider what would happen if you needed that cash immediately or if it declined in value.

We keep our savings in a few different places. Our emergency fund, vacation savings, property tax savings, and car savings are in money market accounts. A money market account is pretty much the same thing as a savings account, but it has a slightly higher interest rate.

We keep our business savings in a high-yield savings account, because it gets used pretty frequently to pay estimated taxes or make big purchases.

Our house savings and f-it fund are currently in CDs and Treasury bonds. With CDs and Treasury bonds, our money is locked up for a period of time and we can’t withdraw it without paying penalties. It also means we’ve locked in a certain interest rate, so when interest rates increase, we lose out on that. But we don’t plan to touch this month for at least a year and the interest on both the CDs and Treasury bonds was better than a savings account.  

This is what works for us, but it won’t necessarily be right for you.

 

How do you keep track of it all?

If you have different savings accounts, money market accounts, and CDs, in addition to other accounts like your retirement and other investments, it can seem intimidating to keep track of it all.

The best thing Jordan and I did to keep our money and ourselves organized was to sign up for Personal Capital. Their free tools aggregate all of your accounts and let you look at all of your money, just by logging into one platform. There’s no need to log in to multiple banks or accounts.

Learn more about Personal Capital with this detailed review and video tutorial and check out all of the tools we use to manage our 21 accounts.

 

How do you save more?

“That’s great, Erica,” you might be thinking. “But how do I find room in my budget to put money into all of these savings accounts I know have?”

Fear not. I’ve broken down how Jordan and I both save more and live more here. Spoiler alert: It involves an automation and asking ourselves one simple question.

Photo by rawpixel on Unsplash

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