Why (& How) I Maintain 7 Different Savings Accounts

I used to have just one savings account: an emergency fund. While that generally worked, I found myself raiding the account for irregular expenses, and not all of them were true emergencies. Semi-yearly car insurance payments or repairs, taxes due, new furniture or toys — those all took me by surprise even though they shouldn’t have. I eventually admitted that I was bad about keeping a buffer of extra money in my checking account, and needed to set the money aside where I couldn’t see it.

Over the years, stable jobs and changing priorities meant that there were goals I wanted to reach beyond not panicking when my car insurance was due. These were big goals I would have to plan for — maybe even for years — like international travel or a house down payment. Those desires drove me to open new accounts with separate goals and shift around my savings strategies. Right now I have seven savings accounts with an online bank:

1. Emergency

Priority: Highest

Strategy: Maintain at all costs

This is my safety net against the unpredictability of the world. I’ve stashed away four months of expenses here (based on my normal spending patterns, not my holy-shit-I-lost-my-job spending patterns), and it is the absolute last place I draw from when I need extra cash. It is strictly for emergency emergencies, and I’m lucky enough that I haven’t had to touch it in over a year.

I am not currently contributing to this account, though I have been thinking about trying to up this to six months of expenses. Whenever I have to draw from this account, all other transfers to savings are halted until the spent money has been restored.

2. Adventure

Priority: Low

Strategy: Drain and refill

For the last few years, I’ve flown to Chicago to visit my best friend on each of our birthdays, which has been a blast. Since we both want to travel abroad, we’ve decided to take an international vacation every other year in place of one of the birthday visits. In preparation for this, I’ve been banking money and vacation days for our trip this fall: the Osaka/Kyoto region of Japan.

Right now this account sits pretty at about 10% of my yearly salary. Even though my friend and I are coming in under budget for our Japan trip, I imagine I’ll still spend a good chunk of the money by the end of it. Right now I don’t contribute to this account, but I’ll need to devise a strategy for topping it back up once the trip is over so I’ll be ready for the next adventure.

3. Car

Priority: Medium

Strategy: Build but regularly tap

This is the account where I save for everything car-related except gas. Car insurance, registration, oil changes, overdue maintenance — all of those things come out of this account. Like today, for example, when I paid $739 for all of the things I just listed. (I’m headed on a road trip in the near future and would like to not be stranded in the desert, thanks.)

I am actively contributing to this account to the tune of $277/month. Since I haven’t had any true car-related disasters in a while, I have been accumulating (and hope to continue accumulating) a surplus. The goal is to one day use the surplus money to buy my next car in cash. That day is still far into the future since my car is only nine years old and has fewer than 100k miles on it.

4. House

Priority: High

Strategy: Build and build and build

I’ll be honest — I’m not even sure if I want a house. The housing market in my area is hot right now, especially for the homes that are in my price range. I am unwilling to raid my savings or retirement accounts for a down payment when I’m not certain I’ll stay in the area. Still, I want to be positioned for the opportunity to buy someday, and that means I need money for a down payment, closing costs, etc.

Creating and funding this account was one of my 2017 financial goals. I’m putting $300/month into it for a slow, steady climb to $3,600 by year end. The goal is to never touch the account until it’s time to spend it on a home — or until a change in my priorities means I need to use this money for something else.

5. Luxury

Priority: Low

Strategy: Toss in extra and wipe it out

Computers grow obsolete. New toys appear on the marketplace. You get really tired of your fresh-out-of-college aesthetic furniture. I’ve got a list of big-ticket items I want to buy eventually as upgrades to what I currently have, but there’s no rush. I’m biding my time, waiting for the perfect version of those items to cross my path. And when they do, I’ll buy them straight away, secure in the knowledge that I have this account to cover the expense.

I don’t have a specific goal for this account, but I toss in money whenever I have some cash leftover at the end of the month. One day I will find a black or gray dresser that I love at a price I’m willing to pay, damn it.

6. Christmas

Priority: Medium

Strategy: Drain and refill

The spreadsheet I used last year to track my Christmas gift-giving spanned seven columns and 37 rows. I have a huge family and several friends scattered across the globe, and it’s important to me that I give them all presents if I’m able. There are also always miscellaneous holiday or charity events either at work or in my community that I like to participate in without any financial stress. In years where I lived in a different state than my family, I used this fund to pay for plane tickets to visit.

To that end, I currently set aside $80/month throughout the year and intend to bleed the account dry in December. (If money is tight in a given month, this is the contribution I skip first — which I have already done this year.) This account lets me enjoy an extravagant and generous holiday season without waking up with a credit card hangover in January.

7. Taxes

Priority: Low

Strategy: Drain and refill

Taxes come like clockwork every February, and I never get a refund. I often had to reach for my emergency savings or contribute less to other financial goals the month I filed, and it was always a frustrating experience. I got fed up with it last year and opened this account specifically to cover any taxes owed.

While I still didn’t save quite enough for my 2016 taxes, I was able to cover more than half of what was due out of this account. This year I’m earmarking an even higher percentage of my freelance pay (which is irregular and variable) for this purpose. Maybe I’ll get the math right this time.

***

Looking at the infrequent but high-cost expenses that popped up in my life repeatedly was a great way to decide what kind of short- and mid-term savings accounts I should open. Lifestyle priorities, like holiday spending and travel, prompted me to open even more. Seven feels like the perfect number of savings accounts for me right now, but who’s to say that’s all I’ll need in the future?

Audrey is an editor and writer who spends her free time on young adult books, Korean tv shows, and video games. You can reach her on Twitter or through her website.

Image via Pexels

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  • GBee

    I love this article. I have many of the same accounts as you do and I find it is the best way to create savings goals and actually stick to them. One account with a large sum just doesn’t motivate me.

  • nancxpants

    I do this too! It’s great because a) it keeps me motivated because I know exactly what I’m saving each dollar for and b) I don’t feel bad when I splurge on my “fun” expenses since I have the money set aside already.

  • Danielle

    I do this too! I have a general savings account with my bank and last year I opened another one for an emergency fund with a different bank. Then I have two locked savings accounts for Christmas and my yearly birthday trip that I can only put into each month and can’t take out off which are deposited into my general savings in October and April respectively. I recently started an Acorns account as well just to check it out and I’m thinking of transferring it into my Emergency Fund whenever it reaches a certain amount.

    This has been *extremely* helpful for me in being able to save! It used to be, if it’s available/easy to see and get to, I can talk myself into spending it. This way, I’ll always have enough for presents and a yearly trip, and I’m working my way up to a solid emergency fund for whatever might happen.

  • AK Barratt

    Really interesting reading about what works for other people. I recently moved the opposite direction myself, using a spreadsheet to keep track of one large account. While this ultimately works better for me (I subtract my debts + emergency fund which motivates me to work harder to get into the black and helped me realize I need a bigger emergency fund), I definitely miss some of the advantages of the multiple-accounts approach. It can be harder to reward yourself because there’s not an obvious place for that money to come from and while it’s helped me pay off my debts more aggressively, it hasn’t exactly motivated me to save more.

    The only way I can see multiple savings accounts being a detriment is if your bank gives you a better interest rate for a bigger balance. Otherwise, do what works!

  • Matt Foley

    How about using an envelope budgeting system?? Mvelopes.com or ynab.com

    • LynnP2

      Yep came here to make this exact comment!

    • Rebekah S

      I do this in tandem with YNAB – the added bonus (for me, and I would assume for the author!) is that keeping the actual accounts separate prevents any accidental runover in your virtual envelopes. 🙂 The separate accounts act as the envelopes themselves with no surprise dings to your budget!

  • Nels P. Highberg

    I’m new to this website having seen this article posted on Facebook, so this may be something most regular readers already know, but does anyone have advice on where to open these accounts? I don’t want to open an account somewhere I need checking for savings to be free or where there is a $12 monthly fee for $144 a year. Is there a previous article with options?

  • YNAB could do all of that with one account 🙂