Do you remember the old kids' game Bubble Gum Bubble Gum?
It was like eenie meenie minnie mo. It went:
Bubble Gum, Bubble Gum in a dish, how many pieces do you wish? You'd pick a number, the chooser would count around the circle of feet and then you-were-not-it.
It's kinda like that with savings accounts (ok, not really, but I really wanted to use the Bubble Gum Bubble Gum analogy). There are so many you can have: IRA, 401k or 403b, hi-yield savings online, regular savings at your brick-and-mortar bank, CDs, on and on.
Then there are the REASONS you're saving: Christmas gifts, vacation, college, unexpected expenses, home downpayment, retirement, Birkin bag, you get the idea.
Usually, you've got lots of things you want to have money for, but how many savings accounts do you need to do that?
One. Two. Maybe six. It really does depend, but K.I.S.S. applies here.
I have seven. I know, cluck your tongue and shake your head. I'll break it down:
Emergency Fund: 3 accounts. One hi-yield online account, one online CD, a Suze Orman Save Yourself account with TD Ameritrade
Travel: 1 account, hi-yield online
Annual expenses (such as Christmas shopping): 1 account, hi-yield online
Retirement: 2 accounts. One 401k with employer, one IRA with regular bank.
All of these accounts except retirement and TD Ameritrade are with HSBC online. So I have four savings funds in seven savings accounts.
I refer to my emergency fund, I am basically talking about my main
savings, not retirement savings. My emergency fund, currently, is a
little more than four months of living expenses. I am working on
getting to six months. Some people are comfortable at three (which is
plenty), while I've heard people recommend nine (which I think is too
Now, I would also use that fund for big, unexpected expenses as well, such as a car repair or a medical expense. When that happens, though, I would replace that money as promptly as possible to keep it at six months. Why? What if I lose my job, or just up and quit because I hate my job? Or if I want to strike out on my own and may not make much at first.
You could have an account separate from your X-months-living-expenses account for unexpected expenses, whatever amount you designate.
It's easy to do this, though, since most online banks allow you to open multiple accounts that you can nickname whatever you want and designate for whatever purpose. It help to keep them separate, to some degree, so you don't spend your vacation fund paying for your new transmission.
Still, I think simpler (i.e. fewer) is usually best. Before the end of the quarter, I plan to move my money out of the TD Ameritrate account into the HSBC account.
How many funds and accounts do y'all have?