How Having Multiple Bank Accounts Can Help You Reach Financial Goals

This method can take you from overwhelmed to in control.

Personal finances are rarely neat and tidy. As much as we try to budget and plan everything perfectly, life happens, and as we grow and change, our financial goals often do, too. This means while one day we might only be worried about paying the rent and buying food, the next we may be planning to buy a house, have kids, and pay off debt all at the same time. Planning for all these expenses at once can feel overwhelming at best and, at worst, impossible—but it's not.

If you're currently working toward several financial goals at the same time (most of us are), utilizing multiple bank accounts may be the solution you need to get organized and feel in control. We tapped financial experts to figure out the best way to do this, exactly how to stay organized when juggling multiple accounts, and how this method can even make you money in the long run.

Why You Should Use Multiple Bank Accounts

There's one word at the root of why separating your goals into different bank accounts is such a good idea: priorities. With all of your money sitting in just one account, it can be hard to know exactly where you should or shouldn't spend it, and therefore, hard to prioritize even one goal, let alone multiple. Utilizing multiple bank accounts, on the other hand, can help you "keep the goals separate and prioritize how much and how often you save for them," says Jill Gonzalez, a financial analyst for WalletHub. "It will also ensure that when you tap into those savings, you can do it without worrying that you're taking away money from a different goal."

While it may seem excessive, Gonzalez recommends starting a different savings account for each individual goal—meaning that money for a wedding, a house, kids, travel would all be separated. "This will make it easier for you to track your progress, especially considering that you need different amounts for each of your goals," she says. "For example, you'd need tens of thousands of dollars for a down payment on a home, while your goal for a vacation could be only $1,000."

If you're looking for an even more structured approach, you can look toward personal finance expert Sahirenys Pierce's High-5 Banking Method.

The High-Five Banking Method

Pierce's High-5 Banking Method is an organizing system for personal finances composed of five different bank accounts—two checking accounts and three savings accounts. The first checking account is dedicated to bills, which includes housing, utilities, insurance, debt, etc. "Because, hey, we all have bills; we need to make sure that we're prioritizing them and paying them off on time," Pierce says on the Money Confidential podcast.

(Read the full transcript here.)

The second checking account is dedicated to personal lifestyle expenses—everything from home essentials like toothpaste to social outings and date nights. "Even though we all want to pretend that we don't have a lifestyle, we all have one, so we need to embrace it and make sure that we're giving ourselves a realistic budget so we can enjoy doing the things that we love to do," Pierce says.

Then, there are the savings accounts. One is dedicated to the emergency fund—three to six months' worth of living expenses that nearly every financial advisor will strongly recommend. Another savings account is for short-term goals, anything you may want to accomplish in the next one to 12 months. The final savings account is for long-term goals, anything you may want to accomplish in over a year or more.

Pierce knows this can sound overwhelming when first starting out, especially if you don't have the means to fund all five accounts at once. That's why she says it's so important to "start where you're at." If you can't fund all five accounts right away, start with the first three—bills, lifestyle, and emergency fund—as these are most important to your immediate life. Then, when you're ready, you can start building upon those other two accounts and goals, giving yourself grace along the way.

"Sometimes when it comes to some goals that we want to accomplish, it takes a little bit longer and we don't need to feel guilty about it," she says. "Sometimes you need to pause on a goal, but you want to make sure that you're still funding it and reminding yourself, 'This is something I want to work towards. This is why I'm sacrificing over here so I can continue achieving this goal over here.'"

How to Stay Organized With Multiple Bank Accounts

Of course, the financial planning doesn't end as soon as you divide your goals into separate bank accounts. Staying organized is key when you have multiple financial goals and accounts. Whether you decide to use the High-5 Banking Method or dedicate bank accounts to individual goals, Gonzalez says it's important to keep your objectives clear in terms of the amount you need to save and the time you need to do it.

"To stay organized, you should set a date each month on which to check on your savings accounts," she says. "You could also use a budgeting tool or a spreadsheet listing all your savings goals with their respective accounts, target amounts, deadlines, and the amounts you should be contributing each month. This should help you keep track of how much you're saving and how close you are to achieving your goals."

Don't forget to leave some room for changes, too. "Another part of being organized is tracking your progress along the way and making any necessary adjustments to make sure you don't miss your savings target or deadline," she says. While saving for a house, for example, you may realize that you need to set aside more money each month to meet your intended deadline. To do so, you may decide to set aside a little less money toward a goal like travel. Checking in on your progress and allowing room for adjustments is how you can make this financial planning method suit your individual lifestyle and goals.

More Benefits to Opening Multiple Bank Accounts

Aside from helping you work toward your financial goals, savings accounts can actually make you money over time. If you're looking to help your money grow while saving up, look for savings accounts with high annual percentage yields, or APYs, typically around 0.5 percent. (An account with an average APY is typically 0.06 percent.)

As explained on NerdWallet.com, "If you have a $5,000 savings balance, choosing an account that pays 0.50 percent will earn you about $25 in a year, while an account paying you the average would earn less than $5. The difference increases the more you deposit and the longer you keep it in the account."

"Another important advantage is that all your savings accounts will be protected by the Federal Deposit Insurance Corporation," Gonzalez explains. That's much safer than that envelope in your underwear drawer.

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