Suze Orman thinks you should have more than one savings account. here’s why
Should I open several accounts?
- Financial expert Suze Orman enjoys helping people achieve their personal goals.
- She says having multiple savings accounts could benefit people.
Many of us have different financial goals that we are working toward. Maybe you’re trying to save for home improvements, a new car, and a vacation all at the same time. And if you don’t have at least three months of living expenses available in your savings account, you should also save to fill your emergency fund.
When it comes to saving your money, you have options. You can open one savings account and keep all your money there. But financial expert Suze Orman says opening multiple savings accounts is a better bet.
A great way to stay on track
Let’s say you need $10,000 to fund a big home improvement project and $3,000 to plan a family vacation. Your home improvement project might take priority over the family trip. But if you keep all of your money pooled in the same savings account, you might accidentally dive so far that you hit a bigger goal for a lesser goal.
That’s why Suze Orman says about her Blog that it makes sense to have separate savings accounts for different purposes. This way you can track your progress towards each goal and prioritize where your money is going.
In fact, Orman says research shows that keeping goals separate helps people stay committed to those goals. So to that end, might as well open separate accounts for each savings goal and see if that helps you progress.
Online banks make it easy to open multiple accounts these days, and often you can name your accounts whatever you want. So you might have an account named “emergency savings,” another named “house down payment,” and another named “new car,” each with funds set aside for that specific purpose.
A good way to protect your emergency money
Another reason why having separate savings accounts is beneficial? You don’t want to rob your savings to the point where you don’t have enough emergency funds.
Let’s say you have $30,000 in savings, of which $24,000 is supposed to be your emergency fund. Over time, you might forget how much of that balance was for emergencies and withdraw $8,000 to pay for a big home renovation. But in doing so, you could inadvertently dip into your emergency fund and suffer later because of it.
For this and the reasons mentioned before, it’s just a good idea to have different savings accounts. Remember, your bank won’t judge you if you open a savings account to buy a new TV or take a trip to an exotic island and relax, so if that’s something you’re saving up for, go -y.
Of course, you will want to open different accounts within reason. If you have multiple goals under $500 each, you’d better combine them into one account that you can label “miscellaneous goals.” But for bigger goals, keeping your money separate this way could really work to your advantage.
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