If you have multiple savings goals, keeping all of your savings in one account can make things complicated. That’s why there are different types of savings accounts to help you better organize and focus on your savings goals.
By having a savings account specifically for a single goal — a vacation, down payment, or emergency fund — you can keep better track on your progress. You’ll also avoid accidentally using funds earmarked for one goal on another one.
5 types of savings accounts you should keep separate
1. Emergency fund
Your emergency fund is money you set aside for the unexpected. It can especially come in handy if you become temporarily disabled or lose your job.
It’s recommended that you have at least three to six months’ worth of expenses in an emergency fund. While that may be a daunting target, try and start your emergency fund with whatever money you can.
Keeping the money in a separate savings account is also beneficial because it’s easier to leave alone. Mixing your emergency fund savings with your other savings may make it harder to view them as emergency-only funds.
2. Holiday spending
It’s not uncommon to ring in the new year with new debt. In fact, credit counseling agencies see a 25 percent increase in people seeking financial help in the first two months of the year. Most of that influx comes as a result of holiday spending.
To avoid going into debt during the holiday season, open a holiday savings account. Put cash into the account each month leading up to the end of the year to avoid becoming dependent on credit cards.
You can also use the account to set a budget for yourself. For example, if you want to spend $600 on the holidays, set a goal to put $50 per month into your holiday savings account. Hold yourself to that budget.
3. Vacation fund
While you may need a vacation now and again, going into debt for a trip with the family isn’t worth it. That’s why eight in 10 Americans paid for at least part of their summer vacations last year using savings.
If you already know where your next trip will be, price it out as far in advance as you can. Then you can begin actively saving toward it. The more you have saved up when it’s time for your trip, the more you’ll relax and enjoy your vacation.
4. Medical expenses
It’s tough to predict when you may incur some significant medical expenses.
If you have a high-deductible health insurance plan, you may be able to set up a health savings account with your bank. A health savings account is a tax-advantaged account created specifically for medical expenses.
What’s more, your contributions are tax-deductible. However, you must use the funds for medical expenses only. Otherwise, you may be hit with a 20 percent penalty on the amount you withdraw.
5. Slush fund
You may have already incorporated some fun money into your budget. However, there might be some things that are out of reach of your standard monthly allowance.
Having a slush fund allows you to save up for the things on your wishlist. Some people may choose to fund this savings account with spare change they get from the cashier at the grocery store. Others may want to save a specific amount in the fund each month.
Whatever savings method you decide on, make sure you are consistent about using it.
Banks that allow multiple savings accounts
Having different types of savings accounts sounds intimidating if your bank doesn’t allow for more than one savings account.
With each bank, you can have several savings accounts with no fees or minimum balances. Capital One 360 allows up to 25 accounts, and Ally Bank has no limit.
Each bank allows you to transfer money to and from another financial institution, so you don’t have to give up your current bank setup.
What’s more, you’ll earn the following interest on each account you have with the banks:
- Capital One 360: 0.75% APY
- Ally Bank: 1.00% APY
Now that you have an idea of what kind of types of savings accounts you should have, write down your savings goals. Then determine which ones should have a dedicated savings account.
If your current bank doesn’t offer multiple savings accounts, consider applying for an account with Capital One 360, Ally Bank, or other financial institution.
Once you have your savings accounts ready to go, set up an automatic withdrawal from your checking account into each every month. This process of turning savings into a monthly bill can make it more easy to reach your goals.
Over time, as your income and goals change, you’ll develop an organized process for maintaining different types of savings accounts. And the best part is you can change how you manage each one as your savings goals change, all the while keeping you on track.
Wondering how much of your income you should save each month? Find out how you can audit your savings habits.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
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2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate||Visit SoFi|
|2.47% – 5.87%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.95% – 6.37%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.72% – 8.32%6||Undergrad & Graduate||Visit Citizens|