You don’t need to limit yourself to just one savings account.
When I first started earning a stable income, one of the first things I did with my money was to build an emergency fund. My original goal was to have enough money in my savings account to cover about three months of bills.
These days my emergency fund is a bit stronger. This is because there is extra money to cover things like home and car repairs. In addition, since I am self-employed, I am usually not entitled to unemployment benefits, so I need a little more protection in the event of incapacity for work.
But in addition to my emergency fund, I have two separate savings accounts. One contains money that my husband and I set aside for a second home. The other is vacation money.
Having non-emergency savings accounts is a system that works well for us. And you might want to go this route too.
Keep that basic protective layer
It may seem easier to keep all of your money in one savings account rather than spreading it across two or more accounts. But separating your savings could really be to your advantage.
Imagine that you decide to keep all of your money in one account. Over time, you might lose track of how much of that money was spent on emergencies and how much you’re free to withdraw for things like vacations, furniture, and home renovations. It could lead you down a dangerous path.
Imagine withdrawing so much money from your savings that you only have two months of essential living expenses left in the bank. If you lose your job and are unemployed for several weeks, this amount may not be enough to get you out of this crisis.
This is why it is a good idea to maintain more than one savings account. You don’t necessarily need to open an account for each specific non-urgent item on your list. Instead, you can have a single savings account with money to spend on travel, vacation splurges, home improvement projects, and other things that are important to you.
But the key is to keep your emergency cash pile separate. This way you don’t accidentally dive into it and get carried away by an unemployment crisis or other serious event.
Make your spending easier
Another benefit of having a non-emergency savings account? You may find it easier to dive into it.
If you keep your emergency and non-emergency savings together, you might be stressed out about making withdrawals. But if you separate those funds, you may find it easier to withdraw cash for leisure purposes knowing that your emergency fund is still intact.
Also, keep in mind that while it’s a good idea to keep separate savings accounts for emergencies and non-emergencies, there’s no reason you can’t keep your different accounts in one place. the same bank. This could make it easier to track your money and access it when you need it.