Want to start saving for a home? For retirement? For Christmas gifts? For getting your masters degree?
To keep your specific goals aligned—and to track your progress in each program—many financial consultants suggest opening multiple bank accounts earmarked for each goal. Because the costs of opening a savings account are low, there's no reason not to open multiple accounts since you have many goals, needs and ambitions.
Carol Kaplan, director of communications for the American Bankers Association, said in a recent Ally interview, "Research shows that when people create accounts for a purpose, they're more successful in reaching their goals. It's easier for them to focus. If you want to go on a big vacation next year, consider opening an account devoted just to that. Open another one to buy a car."
Kaplan says there's no disadvantage to having multiple savings accounts as long as you remain mindful of the limits on Federal Deposit Insurance Corporation (FDIC) insurance protection in one bank.
Ally also interviewed George Barany, director/financial education at America Saves, a national, non-profit coalition of various groups that promotes saving. "Having a specific goal really helps," says Barany. "The number-one goal of many participants in his program is establishing a rainy-day emergency fund. We recommend setting a goal of $500. For many people, that's more obtainable than six months' salary."
Of course, there are perfectly good reasons to set up a savings account besides being prepared for an emergency. There's also the common-sense program of putting money aside today for spending tomorrow.
Pick some future cost you know you will incur—payment of your homeowners' insurance, for example. Divide the amount by 12, and deposit that amount every month into a savings account dedicated to that use. Ask your bank to transfer the monthly amount automatically from your checking account into savings. When the year is up and you've saved the full amount, transfer it back to checking and make the payment. Don't forget that at Ally we compound interest on a daily basis, meaning your money is always working for you, even while it waits.
The goal for Charles Ali, an employee with the water department of the city of Cleveland whom Ally interviewed, was a down payment for a car. "I had a savings account," he says. "I just wasn't accomplishing anything." So, he opened a second account specifically to accumulate funds for the down payment. Result? After a year of depositing his loose change and the money he saved by eliminating a variety of discretionary purchases (lottery tickets were the first to go), he had the amount he needed.
Take a look at Ally's Online Savings Account and our Money Market Account and get started on your multiple savings account strategy.