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using multiple savings accounts

Using Multiple Savings Accounts. I’ll Show You A Thing Or Two.

I’ve long hinted here at Creative Finance that I personally use a number of different accounts and banks for a number of different purposes.  Today I’m very excited to tell you all about my system of using multiple savings accounts for a variety of different goals and reasons.

For those that are newer to the blog let me rewind a quick minute.  Growing up in suburban New Jersey, my family banking orbited pretty wholly around Chase Bank.  Chase Banks were as plentiful in Jersey in the 90s as local pizza establishments, deer & turkey roaming wild, or rows and rows of chorus girls singing “Hard-knock Life” populating an Essex County middle school production of Annie.

It wasn’t until just about a year ago that I discovered the brilliance of online banking and moved my primary accounts over to Ally Bank.  When I signed up for Ally last year I was receiving 1.6% interest in my high yield savings account, or 160X (!) what I was getting with Chase.  Those rates have gone down during the pandemic, but are still much more competitive than the brick & mortars, currently sitting around 0.5%.

But there’s more to the equation here.  Much, much more dear reader.

I had always been the type of person to keep pretty much all of my money in one place.  I would look at my savings and think, “OK, I know I need X amount for this, and Y amount for that, and Z, and so on.” And I thought I had a good pulse on what was going on.

And I would inadvertently forget things along the way.  I’m only Human, Again!

So, as I learned more and more about online banks and credit unions, I have found a couple I love along that way that offer me multitudes of benefits.  Primarily:

1) Accounts that give me high interest.

2) A way to spread my money out, and earmark for different things.

If those two points sound interesting to you and you might consider using multiple savings accounts- you’re in the right place.  Let’s take a look at my money umbrella.

I’ll Cover You (With High Interest)

using multiple savings accounts

I’m pleased to present the Broadway Joe Banking Umbrella!  This is an illustration of what I’ve chosen to do personally with banking, and I’m going to explain exactly why.

It all starts with Primary Checking.  I use Ally Bank for my primary checking for a number of reasons.  As you’ll see when we work through this, I have a number of different savings accounts that are outside of Ally Bank.  One great aspect of Ally Checking is you have the ability to link many different outside accounts for transfer vs. banks like Chase and Bank of America typically limit you to three accounts before additional fees are incurred.  I have 8 savings accounts alone with Capitol One that I transfer money to!  Ally does not charge you for any domestic transfers, and remains a zero-fee account otherwise.

With every paycheck or source of income I receive, I like to send a small portion of it to my Ally Primary Savings no matter what.  This is the account I consider my “Active Primary Savings” where I can draw money for Rent and Utilities at the end of every month.  But the goal is to continue to see it go up month after month.

Otherwise, you’ll see I use Capital One 360 Savings to keep a variety of “Sinking Funds”.

Sinking Fund is essentially a place where you can set aside money regularly, knowing there is a purpose for withdrawal within a short time frame.

For example, I keep a Capital One 360 Savings Account that is wholly dedicated to my end of year Christmas shopping.  If I know I will spend about $500 on Christmas gifts every year, I will set aside about $41/month in this account to cover those end of year expenses.  Meanwhile I get interest returns on that money, and if I’m looking at that account and thinking about that new bicycle I want to buy for myself…that sinking fund money is off limits.  Otherwise how will I afford to pay for Christmas gifts at the end of the year?  (Maybe historically your answer to this question has been, put it on a credit card!  Keep that balance at zero creative financiers, I know you can do it.)

In terms of using multiple savings accounts, I have 8 different sinking funds with Capital One that all employ different goals and purposes.

But my sinking funds aren’t my emergency fund, and we all know how important those are.

For my emergency fund, in addition to my Ally Primary Savings, I keep a variety of high interest accounts open with credit unions like DCU and NetSpend.  These accounts require a tiny bit of upfront work to get started, but once they’re in place, you can get upwards of 5% annually on the money you keep there.

These are the high interest accounts I’m currently using, and where you can also get signed up or learn more if you’re interested:

1) DCU – Digital Credit Union – 6.14% up to the first $1,000 in your account.

2) NetSpend Prepaid – 5% up to the first $1,000 in your account.

3) NetSpend ACE Elite Prepaid – 5% up to the first $1,000 in your account.

4) NetSpend Western Union Prepaid – 5% up to the first $1,000 in your account.

5) NetSpend H-E-B Prepaid – 5% up to the first $1,000 in your account.

6) Service Credit Union – 5% up to the first $500 in your account.

I’ve already written blog posts on both DCU and NetSpend, go check them out when you have a chance! Full disclaimer if you sign up for NetSpend using my referral code, we’re each going to get a little bonus as well.

These high interest accounts give you 5% interest up to $1,000 in the account.  So at the end of every quarter when the interest gets paid out, I make sure to transfer anything above $1,000 over to my Ally Primary Savings, to keep growing that primary savings account, and getting my 0.5% interest on the money earned from my super high interest accounts.

It’s The Little Things You Save Together

A traditional bank isn’t the only place one can save a little money as well.  In addition to the various accounts I keep and have already told you about- I like to use a few FinTech apps to stash away little bits of money here and there in addition to using multiple savings accounts!

Dobot is a fantastic app to use in tandem with your account planning- I did a whole article on why I love this app a few months ago.

In Dobot you have the ability to set up to 4 goals, and you link your primary checking account to the app. Once or twice a week, your little Dobot will scan your checking account and withdraw a small amount of money straight to the app, and then split it up amongst your various goals.  You can set a threshold of how much it can withdraw at a time, you set your goals by amount and target date, and Dobot does the rest.

If you’re interested in trying this little app out, I couldn’t recommend it more.  Use my referral code when signing up and we both get a little bonus out of it!

Peak Savings is another app I use and can recommend.  Peak does in essence the same task as Dobot, but you set the withdrawal amount and frequency- and the app just stashes and categorizes the money for you.  I like to use Peak for certain expenses I know will come along every year- my annual fee on my Chase Sapphire card for example (do you know why I love this card so much?).  Here’s a link where you can learn more about Peak Savings.

using multiple savings accounts
A look at Peak Savings!

I want to take some time in the future to detail the rest of the microsavings apps I use, but if you want to get a head start you can check out: Ibotta, Drop, Dosh, and Pei!  But more on those at a later date.

Finale Thoughts

The point is today’s post is all about understanding banks and institutions as tools within the framework of your financial success.

I know it’s hard to consider switching banks- I was with Chase for my entire life before I took the plunge and switched to Ally, but if you understand why the switch can be beneficial I think you’ll learn there are tons of great resources out there to better help you manage your money.

And a reminder that banks are not credit cards.  Having multiple bank accounts does not impact your credit score, it doesn’t leave you more liable to theft- it’s a system for you, and you alone to use.

I’m entirely cognizant of the fact that this “splitting” approach might not work for everyone.  Maybe you’re the kind of person that can look at a moderate to large sum of money and just get it.  Bravo!  There’s absolutely nothing wrong with that.

But if you’re like me, and it helps to visually lay things out separately to better understand their worth- this is a system that may very well work for you.

This system and this post don’t even begin to touch retirement and investment accounts, but those are obviously part of the equation also.  With many moving parts, it will also be good to implement a practice of tracking and writing down the status of these accounts at various points in time.

Don’t hesitate to reach out if you have any questions at all.  One of my resolutions for the new year is providing even more information with transparency.  So very happily, I’ll show you a thing or two!

What’s your favorite Savings Account?  Are you already using multiple savings accounts?  Drop a comment below and let me know your thoughts!

This post may contain affiliate links.

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