How many savings accounts do you need?

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.

When 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 much).
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?

DH

Comments

[debtor]

i have 2. A long term...don't touch unless I am out of work fund and another fund that just serves for emergency things that may come up (car emergency, travel emergency etc).... lately i've been wanting another fund to save up for wants...like an ipod touch and a camera...but i wasn't sure if getting another account was worth it... I have HSBC and i might think about opening another account for that purpose.. iknow BOA lets u name ur funds so i'll play around with HSBC and see

[Craig]

Right now I have one savings account, one vacation fund/emergency fund account, and one general mutual fund investing savings account.

[Revanche]

Heh. Um, something like a dozen across three banks? That doesn't include checking accounts. But I keep my funds separated by goals.

[Shawanda]

I have two savings accounts with ING Direct. One is a basic emergency fund with 8 months of living expenses. I'm a bit more conservative. The other is for a down payment on a house.

I've been thinking about opening a savings account with SmartyPig. A little diversification among savings accounts can't hurt too much.

Love how you mention the risk of up and quitting a job that you hate. I've been in that position before. Couldn't have done it without a decent cash cushion.

[Prince Of Thrift]

I have nine, and have had thoughts of open some others. I just published a post about them and why I have so many. Asking readers, if they think I have to many? I don't think so, when used the way I use them, but still interested in what others think.

http://www.debtfree4ever.net/2009/08/can-you-have-to-many-savings-accounts.html

[WSF1]

I am so excited to read this. One of my friends thinks I need therapy for addiction to bank accounts. I have four savings accounts - each for a specific purpose.