One of the many consequences of the Federal Reserve's aggressive series of interest rate hikes since March 2022 has been a sharp increase in the yield you can earn in your savings deposits. Today, the top high-yield savings accounts pay an annual percentage yield (APY) of 5% or more, while rates on the top money market accounts are as high as 5.25%.
If you currently have a single account that does not match these payouts, it may be time to consider opening a new one or a secondary account—even if that means turning to a new bank or credit union.
Key Takeaways
- Today, the best high-yield savings accounts pay an APY of around 5% or more.
- If your current savings account isn't offering competitive rates, opening a second account at a different bank or credit union could be a smart option.
- Multiple accounts can offer you additional FDIC coverage, and help you achieve specific savings goals.
- There should be little to no impact on your credit score for opening multiple accounts at different financial institutions.
Benefits of Multiple Savings Accounts
The current high-rate environment represents an ideal opportunity to reevaluate your savings plan. If you've been stashing your savings deposits in the same account for at least a few years, it's worth checking that the current APY you're earning is competitive with today's top rates.
Opening multiple accounts could be one way to ensure that you're maximizing the potential of your savings by earning the top yield. The flexibility of having more than one account can also help you manage fluctuations in interest rates, which could be important when the Fed eventually pauses its hikes and rates begin to move lower.
In addition, by splitting your savings into more than one account, you boost the amount that can be covered by the Federal Deposit Insurance Corporation (FDIC). The FDIC guarantees your deposits up to $250,000 per individual per institution, so opening several accounts can multiply the deposits that you're entitled to have insured.
Holding your savings in multiple accounts can also be a way to help you stay on track to meet specific goals. For instance, if you're saving for a down payment on a house, you could open an account where you set aside money specifically for that purpose. This could help you avoid the temptation of spending these funds on other things.
Some banks and credit unions may offer bonuses to incentivize your deposits and loyalty programs to reward you for your banking relationship. Shopping around and opening several accounts can help you take advantage of these opportunities to make the most of your savings.
How to Manage Multiple Accounts
The process of opening a new savings account—or another interest-bearing deposit product like a money market account (MMA) or a certificate of deposit (CD)—is quick and easy. At online-focused financial institutions as well as the big-name traditional banks, you can often open an account with your computer or mobile device within a few minutes. All you'll need is your ID, Social Security number, and some other basic personal information.
When it's time to transfer money into your new account, the process is also relatively painless and simple. You should be able to move funds between your accounts with no more than the routing number and account number. Once you've linked your accounts, you can easily transfer money back and forth, making adjusting and managing your savings plan simple.
However, when you request an electronic transfer, your funds can take one to three days to arrive in the destination account, so it's important to plan accordingly. You will also need to keep in mind any potential transaction or withdrawal limits, which could vary based on the type of account.
Almost Never an Impact on Your Credit
Given the relative effortlessness of the process and the potential to enhance the earning power of your deposits, you might be wondering if there are any downsides to holding multiple accounts—particularly in terms of your credit score. Fortunately, opening a savings account generally won't have a negative impact on your credit, as banks and credit unions typically don't report savings account information to the credit bureaus.
Generally, banks and credit unions do not check your credit when you open a savings account, or they do a basic overview of your credit report, known as a "soft pull," without impacting your credit score. It is very rare for financial institutions to carry out a more intensive credit inquiry known as a "hard pull" when you apply for a new deposit account. Even in this case, the effect on your credit score should be temporary and relatively minor.
FAQs
Having multiple savings accounts could help you keep your money covered by FDIC insurance, keep your emergency fund safe from spending, and help you better track your goals.
Is it worth having multiple savings accounts? ›
Having multiple savings accounts could be a smart move if you have very targeted financial goals. It makes it easier to keep those goals separate and prioritize how much and how often you save toward them.
Is it better to have more money in savings? ›
The general rule is to have three to six months' worth of living expenses (rent, utilities, food, car payments, etc.) saved up for emergencies, such as unexpected medical bills or immediate home or car repairs. The guidelines fluctuate depending on each individual's circ*mstance.
Is it worth having more than one current account? ›
Although having more than one bank account can usually help manage your finances, having too many could actually make it more difficult. If you have too many to manage, it can become difficult to maintain the funds in each one and to remember what each pot of money has been set up for.
Is there a downside to having multiple bank accounts? ›
While there are some clear advantages to having multiple bank accounts, there are also some potential drawbacks to consider: Minimum balance requirements: Some banks and credit unions require that you keep a certain amount in your account to keep the account open or to avoid a monthly fee.
Does having multiple savings accounts hurt your credit? ›
Multiple accounts can offer you additional FDIC coverage, and help you achieve specific savings goals. There should be little to no impact on your credit score for opening multiple accounts at different financial institutions.
How many savings accounts should you own? ›
While there's no blanket answer for how many savings accounts you should have, Woroch recommends at least two on top of the investment accounts you're using to save for retirement: one for emergencies and one for goal-based savings for purchases like a home or car.
Is $20000 a good amount of savings? ›
Having $20,000 in a savings account is a good starting point if you want to create a sizable emergency fund. When the occasional rainy day comes along, you'll be financially prepared for it. Of course, $20,000 may only go so far if you find yourself in an extreme situation.
Is $1,000 a month enough to live on after bills? ›
Bottom Line. Living on $1,000 per month is a challenge. From the high costs of housing, transportation and food, plus trying to keep your bills to a minimum, it would be difficult for anyone living alone to make this work. But with some creativity, roommates and strategy, you might be able to pull it off.
How much savings should I have at 40? ›
As a general rule of thumb, you'll want to have saved three to eight times your annual salary, depending on your age: 40: At least three times your salary. 45: Around four times your salary. 50: Six times your salary.
Multiple checking accounts: pros & cons
| Pros | Cons |
|---|
| Separates your cash for specific needs and goals | Is more complicated to keep track of your finances |
| Removes the temptation to spend the money needed on something else | Potential for fees if you go under a certain balance or use fee-bearing features with an account |
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There's no set number of bank accounts you should have. The number of bank accounts that are right for you depends on your personal financial situation and goals. You may have too many bank accounts if you cannot manage them all or you're no longer contributing to them all.
Why do people have more than 1 bank account? ›
There are lots of good reasons for having two or more bank accounts: So you can keep banking if your main account is frozen or closed. As a way to separate your spending money from your bills. To take advantage of special offers or other benefits associated with the new account.
Which is safer money market or CD? ›
Both CDs and money market accounts are safe investments. They typically include FDIC insurance and don't involve the purchase of securities that may fluctuate in value. The only situation in which your investment could be at risk is if the financial institution at which you open the account declares bankruptcy.
Should I keep all my money in one bank? ›
Keeping all of your money in one bank can be convenient. But it's important to consider whether you're getting the best rates on savings and paying the lowest fees for checking accounts. It's possible that you could get a better deal by keeping some of your money at a different bank.
Is it smart to have money in multiple banks? ›
It can be beneficial to have multiple bank accounts. At minimum, it's a good idea to have a checking account (for your spending money and for paying bills) and a savings account. If you want to save for the short term and the long term, or have different savings goals, consider setting up multiple savings accounts.
How much money should I have in my savings account at 30? ›
Fidelity Investments recommends saving 1x your salary by 30. At the end of 2021, the average annual salary was $49,920 for 25 to 34-year-olds and $58,604 for 35 to 44-year-olds. So the average 30-year-old should have $50,000 to $60,000 saved by Fidelity's standards.
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