Some people are lucky if they have one savings account, so why would you go and collect several? Here’s why you should consider opening more than one savings account.
Contents
1. You Can Safeguard Your Emergency Fund
If you only have one savings account, it should be an emergency fund. These savings give your budget a boost when you have to spend more than you expect in a month. You can tap them if you’re laid off suddenly or have to replace your fridge, oven, and furnace in the same month.
People without emergency savings don’t have this safety net in place when unexpected expenses come their way. They have to rely on credit cards, lines of credit, or personal loans in emergencies.
These financial products can be useful, even if you have an emergency fund. They can supplement your savings when you’re first building this account, or if you recently withdrew most of your balance.
If you don’t already have a line of credit, you can safely wait until your emergency arrives to apply. Most online lenders offer quick and convenient platforms that work well under pressure. Filling out an application is easy and 100% online, and you can draw against your line of credit the same business day as approval.
2. You Can Prevent Overspending
Your savings play many roles in your finances. Besides pitching in during emergencies, they give you the means to offer a down payment on a house, splurge on a vacation, or purchase an expensive new gadget.
If you let all these goals mingle in the same account, there’s no clear way to delineate what money is earmarked for which goal. You can accidentally spend the cash you need for your down payment on something fun (but unnecessary) like a new entertainment system.
Separating them makes it harder to overspend in one category.
3. Multiple Accounts Make it Easier to Budget
Long-term goals benefit from regular tracking to make sure you’re on target. Monitoring your progress for all your separate goals is a lot more straightforward when they live in separate accounts. Most banks will even do the tracking for you, letting you know how far you have to go to reach your objective.
4. You Can Tap into Customized Investment Strategies
Some goals do better in specialized savings accounts, like your retirement. Your retirement fund benefits from a long-term investment strategy compared to short-term emergency savings. With decades to grow, your retirement fund can live in GICs, RPPs, and tax-advantaged RRSPs that come with strict withdrawal restrictions.
Ordinarily, withdrawal restrictions go against the need for agile savings in an emergency fund. But for your retirement fund — something you won’t need for decades — you can trade these restrictions for higher interest rates to grow your wealth.
5. New Accounts Come with Sign-On Bonuses
Most banks and credit unions attract new customers by offering sign-on bonuses, like promotional interest rates, reward points, and even cold-hard cash. You can take advantage of as many of these perks as possible by opening multiple accounts.
6. You Can Capitalize on High Interest
When one promotional interest rate ends, another may start up again. Suppose you have multiple accounts spread across different financial institutions. In that case, you can move your funds between accounts, chasing after the best interest rate to earn as much money as possible at any given time.
7. It’s Free
Best of all, basic accounts are free, so there’s no harm in opening more than one account. So, give it a try! Sit down with your budget, figure out your goals, and open new accounts today.
