The Case For Multiple Savings Accounts

If you have one checking account and one savings account, you’re in good company; lots of people do. However, there are reasons to consider opening additional savings accounts, especially when you have specific financial goals. By creating a savings account for each of your goals (emergency fund, auto repair, house down payment, vacation, etc.) as opposed to one combined account for everything, you can easily keep track of your account—and see progress towards each goal.

Designating multiple savings accounts can motivate you to save more.

If you are setting aside a fixed amount of savings each month, a $200/month commitment may initially sound pretty good. However, if you’re attempting to build a $5,000 emergency fund, save $2,000 in a vacation fund, and put $1,200 towards your auto insurance, that same $200 monthly deposit might not seem to stretch quite as far.

By opening separate savings accounts (one for each of your goals), you can prioritize your goals, and start funding each account. This can help you monitor your progress, and even motivate you to go back to your monthly budget to look for additional funds for each of your specific savings targets.

Funding multiple accounts gets even easier if you automate your savings (set up direct deposit from your paycheck or automatic transfers from your bank account), and pay yourself first. You won’t need to worry about saving more for your goals at the end of the month, because by going on autopilot, you’ve already designated your savings targets.

Tracking how close you are to achieving your goals becomes easier with multiple savings accounts. You’ll see the balances in each of your individual accounts grow over time, which can be highly motivational. Having your savings goals clearly defined, and your progress toward each goal easily accessible, can decrease the likelihood that you will withdraw from one of your accounts for an unrelated expense or purchase.

Considerations before opening multiple savings accounts.

Of course, there are considerations before opening additional savings accounts.

Some financial institutions may charge a monthly or annual fee without a minimum balance, or require a certain amount in order to earn interest (or pay more interest the higher the balance). Allocating your savings to separate accounts may help you meet your goals, but may also cause you to miss out on earned interest because your balances in each account are lower than if they were combined into one. Be sure to read the fine print on your account and understand if there are any requirements and/or potential penalties by splitting your balances.

Also use caution when making manual or automatic transfers between your savings accounts; you don’t want to inadvertently transfer to or from the wrong account.

What is Regulation D, and does it impact your savings accounts?

Speaking of transfers, another factor to consider with multiple savings accounts is how Regulation D will impact your goals (Note: Regulation D has currently been suspended, so limitations no longer apply).

Before April 24, 2020, Regulation D, or Reg. D, was a requirement that applied to all savings accounts in the United States, regardless of which financial institution held your account.

Regulation D limited the number of online/mobile, telephone, fax, or ACH transfers or withdrawals you could make from your savings account each month to six. The limit also applied to bill pay transactions, overdraft transfers from savings accounts, and withdrawals by check initiated in any of these ways.

If you just had one savings account, you could reach the six transfers/month limit quickly if you were withdrawing from savings for different types of goal spending.

The Federal Reserve suspended Reg. D in April of 2020 through a move intended to help consumers survive the financial fallout of the COVID pandemic. Though it was originally a temporary measure, as of October 2022, Reg. D has been suspended indefinitely.

Financial institutions are still free to impose this restriction as they see fit, so it’s best to learn about any withdrawal limits your banking partner may have before opening a savings account (Quorum does not impose any Regulation D restrictions).

That said, if Regulation D was still in effect, establishing multiple accounts would give you additional withdrawals, as you will have a six-withdrawal per account limit. So, if you have an emergency fund account, a vacation fund account, and an auto insurance account, you have a total of 18 withdrawals or transfers each month.

The choice is yours.

Ultimately, whether you opt for multiple savings accounts, or stick with a combined savings account, setting aside money every time you get paid is the most effective way to reach true financial independence and success. If you only have one savings account, give an additional one (or two, or three) a try, and see if reaching your reward becomes faster, or easier.