Chris O'Shea
How many savings accounts do you have? One? Two? Five? The number of accounts doesn’t matter nearly as much as what kind of accounts they are. Here’s what to consider.
One or More
You probably already have at least one savings account. Just how many more you need comes down to personal preferences. However, setting up multiple savings accounts to fit your savings goals is a good way to go. For example, maybe you have one for your emergency fund, one for your vacation next year, and one for that new car you’ve been eyeing.
The Emergency Account
If you only have one savings account, make sure it’s an emergency fund in a high-yield savings account. These are the bread and butter of your savings accounts.
- Growth Potential. High-yield accounts give your money the best chance to grow at the fastest pace.
- Prepare for the Unexpected. You don’t want to get caught flat-footed when life deals you an unexpected expense. Save a portion of your income by setting up automatic deposits from your paycheck or automatic transfers from your checking account.
- Cover Living Expenses. At the bare minimum, you want to have enough in that fund to cover three months’ worth of expenses.
Where to Go
When considering high-yield savings accounts, do the following:
- Shop around for the best interest rate.
- If you find a better rate at a new bank, open an account. It may be better for you to have your emergency savings at another bank to remove the temptation to withdraw.
- A good place to start is online banks and credit unions.
- Consider your current financial institution. Contact your bank or credit union for current rates. They may give you a loyalty or member rate for opening a new account.
Do One Thing: Check credit unions and online banks for their high-yield savings account options.
