Can You Have Too Many Savings Accounts?

Working at Franc I have found out the answers to a lot of questions I’d always had about financial things, but one question I have yet to figure out the answer to is how many savings accounts should I actually have? This is a question I find myself re-visiting rather frequently as I have quite a few (read: probably too many) goals that will require me to have money to achieve. For me, it comes down to a dilemma. If I put all the money for each goal into 1 account then it can compound quicker and possibly have a higher interest rate. On the flip side, putting all of the money in one account means I would probably spend way too much on one goal and jeopardise the others, just because I can.

So, I decided to finally sit down and see what the internet has to say about this topic. It turns out that I really didn’t need to be this conflicted because somehow the whole internet (read: the first page of Google results) actually agrees on this. More savings accounts are better and here are a few reasons why. (From a psychology perspective and not necessarily a financial one!)

Let’s start with “protecting yourself from yourself” as The Balance says it. When you have all your savings in one account there is nothing to stop you from spending everything in that account towards one goal even though you told yourself you wouldn’t. Having separate savings accounts with one named for example “Christmas presents” will leave you feeling a bit guilty if you spend all that money on a weekend trip.

It’ll also be easier to manage your progress towards each goal since all you will need to do is check your account balances. I’m not sure about you but I tend to operate on a policy of the less math the better in my personal life. So, not having to do any calculations when I look at my savings is a major pro for me. Having this visibility will also help you see when you’ve gone off track and may not make one of your goals. You will then be able to begin to figure out what changes you can make to still reach your goals.

This visibility is also very motivational. Seeing yourself making steady progress towards all of your goals becomes exciting. Plus when you are making smaller transfers it feels like you are doing more with less. We all know the pain of large transactions!

Having multiple savings accounts did not come without its warnings though. As always you should keep an eye on the fees you are paying on each account because they will definitely affect how long it takes you to reach your goal. If you are going to have multiple accounts and each is charging you high monthly fees relative to the interest earned in each account then you are probably losing money every month which defeats the purpose.

Then it’s also good to remember each account will also add a little more admin into your life. Managing several accounts may turn into quite a bit of effort if you chose to save with a company that has unnecessarily long processes. No matter how many accounts you have it  will definitely save you time to set up automatic transfers of money into the different accounts.

Franc aims to start offering the ability to save towards multiple goals early in 2022 - so here you will be able to have all the perks of multiple savings accounts whilst still paying the low fee of 1% per year on your investments.

So, now that you know all of this, do you think you can have too many savings accounts? I don’t think you can but let me know what you think using the new comments feature below.