Should you have one savings goal at a time? Or is it smart to work toward several goals at once, and perhaps even have multiple savings accounts? The answer might depend on what your goals are and what your financial circumstances are, but it’s worth considering the merit of having several savings avenues at the same time. While ticking off one savings goal at a time can feel good, it’s also great to know that you’re saving for other things, especially if you have long-term savings goals.
Why You Should Divide Up Your Savings
Dividing up your savings helps you to set targeted goals and stick to them simultaneously. If you just have one general savings account that you put all your money into, you could be more likely to dip into it for impromptu or unexpected purchases when it’s not necessary. When you set targets for your savings and keep your goals separate, you can monitor your savings and keep up good behavior by pushing yourself to meet your goals. Setting several savings goals is a good thing to do but start by making sure that you have a good emergency fund.
In general, I recommend having a main savings account. In essence, this play into your net worth. In addition, an emergency fund and maybe a savings account for fun activities are useful.
Use Multiple Savings Accounts and Products
If you’ve decided that you want to save toward several savings goals at once, it’s smart to open different accounts for each goal as mentioned above. I’ve mentioned in the past the benefit of using local financial institutions such as credit unions. When you choose the right credit union bank or other financial institution, you can open up savings accounts of different types. Each type of account could be better suited to a specific goal that you have. If you want to maximize your savings, you can lock them away for a few years. Or if you want instant access to your emergency savings, a standard savings account could work for you. A health savings account can ensure you have money for medical costs, while an IRA can get you prepared for retirement.
Find Tools to Monitor Your Savings
Monitoring your savings helps you to see how close you are to your goal, which can encourage you to keep saving. Your bank might provide you with tools to clearly see your progress, but you can also find other tools that will help you track your goals. There are websites and even mobile apps that you can use to see what you have saved where and how close you are to reaching your goals.
Prioritize Your Goals
Even though you’ve set several savings goals, it doesn’t mean you have to treat them all the same. Some might be more important than others, so you might want to pay more into a particular account. Decide which savings goals matter most to you and use your multiple accounts to your advantage to help you meet your most important goals first. Based on your particular situation, you might want to focus on short-term savings goals while others focus on long-term goals.
Having a number of different savings goals and separating your money into different accounts is a smart move if you want to make the most of your finances.