How Many Savings Accounts Should We Have

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
User avatar
Topic Author
abuss368
Posts: 17221
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

How Many Savings Accounts Should We Have

Post by abuss368 » Thu Mar 25, 2010 2:16 pm

How many savings accounts does a typical Bogleheads have? We presently do not escrow our real estate taxes. As a result, we have one account for savings, and a second account for our real estate tax. We were also thinking about a third account for future purchases (to avoid debt).

Then we started to consider if it would work best to have one savings account, and use it on a subaccount basis (through Excel), tracking regular savings, tax escrow, and future purchases. Simplicity?

Thoughts are welcome from all. Please advise.

Thanks in advance.

User avatar
CABob
Posts: 4791
Joined: Sun Feb 25, 2007 8:55 pm
Location: Southern California

Post by CABob » Thu Mar 25, 2010 2:56 pm

That is pretty much an individual choice depending upon individual circumstances. There is no reason you couldn't have a single account for the purposes you describe, but, if that causes you to have some tracking, saving, budgeting, etc issues then you might want multiple accounts. Personally my wife and I each have credit union accounts as well as joint ING savings account and a Vanguard money market fund. Some of this was due to yield chasing and a desire for each of us to have some of our "own" cash.
There is also a lot to be said favoring a minimum number of accounts for simplicity.
Bob

livesoft
Posts: 69651
Joined: Thu Mar 01, 2007 8:00 pm

Post by livesoft » Thu Mar 25, 2010 3:14 pm

I have 0 savings accounts. I prefer to invest my short term stuff in short term bond funds. I don't think you should have any savings accounts. :)

Chuck
Posts: 2090
Joined: Thu May 21, 2009 12:19 pm

Post by Chuck » Thu Mar 25, 2010 3:24 pm

While I'm hesitant to say what you should have, I'll agree with livesoft that my family does not have a savings account. Our assets are sufficient to handle fluctuations in short term bond funds, and as a result we get to enjoy their higher yield. With smaller assets (say, just enough to pay the next tax payment) a savings account would make much more sense. But that safety costs real money, and I've decided that we can live without it.

User avatar
TJAJ9
Posts: 1241
Joined: Sat Sep 12, 2009 3:37 am
Location: Philadelphia, PA

Post by TJAJ9 » Thu Mar 25, 2010 3:26 pm

I have two savings accounts, but I don't keep much money in them. I keep most of my "savings account money" in intermediate-term bond funds. 8)

When interest rates go back up, I might put my money back into a savings account.

therub
Posts: 190
Joined: Tue Aug 19, 2008 12:28 pm

Post by therub » Thu Mar 25, 2010 4:06 pm

I have 7 savings accounts at ingdirect.com. It's an awesome and very lazy way to save and budget. Most of the accounts have an automatic monthly contribution (for instance $300/mo to car fund).

User avatar
Toons
Posts: 13427
Joined: Fri Nov 21, 2008 10:20 am
Location: Hills of Tennessee

Post by Toons » Thu Mar 25, 2010 4:44 pm

I use 2 accounts......ING electric orange and Vanguard Short Term investment grade :D
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

User avatar
Padlin
Posts: 677
Joined: Thu Mar 01, 2007 7:46 pm
Location: MA

Post by Padlin » Thu Mar 25, 2010 8:07 pm

I have 4 accounts in 2 banks but really only need 1 in each these days. At the local bank, one of the 2 was an emergency fund, kept separate so as not to be touched. The other is for GP use, currently has $ in it for a kitchen rebuild. One of the 2 out of state accounts used to be a christmas fund which I just haven't bothered to close, both the out of state accts are now used for more long term savings, cars and such.
Regards | Bob

natureexplorer
Posts: 4192
Joined: Thu Sep 03, 2009 10:52 am
Location: Houston

Post by natureexplorer » Thu Mar 25, 2010 11:23 pm

Like therub mentioned, at ING Direct you can easily set up separate savings accounts online.

CAP
Posts: 374
Joined: Mon Oct 06, 2008 11:10 am

Post by CAP » Fri Mar 26, 2010 10:06 am

I had 2 savings accounts at one time but I terminated them & now do not have any at all. I now have one checking account used to pay bills & for direct deposit. All other money is invested elsewhere.

norm
Posts: 594
Joined: Mon Feb 19, 2007 7:10 pm

Post by norm » Fri Mar 26, 2010 10:24 am

I have one savings account for my emergency funds plus money that I am sitting on and planning to invest.

User avatar
femur
Posts: 317
Joined: Fri Apr 11, 2008 2:07 pm

Post by femur » Fri Mar 26, 2010 11:57 am

I have 2.

One is for my emergency fund.
The other is savings for purchasing a house in 5-7 years (I have some CDs for this too).

I could consolidate into one, but I like keeping it separate .

mptfan
Posts: 5736
Joined: Mon Mar 05, 2007 9:58 am

Post by mptfan » Fri Mar 26, 2010 12:03 pm

I have one savings account because I am required to do so in order to be a member of my credit union. It has just enough to meet the minimum balance requirements, and little more. I don't have any other savings accounts.

User avatar
Swamproot
Posts: 307
Joined: Tue Aug 19, 2008 5:10 pm

Post by Swamproot » Fri Mar 26, 2010 12:06 pm

therub wrote:I have 7 savings accounts at ingdirect.com. It's an awesome and very lazy way to save and budget. Most of the accounts have an automatic monthly contribution (for instance $300/mo to car fund).
I thought I would be the weird guy with 7 savings accounts. :-)

I get paid once a month and use them for slots to hold money until the bill or need for it comes due or arises. Sounds complicated but whatever is left over I know I can spend without having to remember what is outstanding.

acegolfer
Posts: 1570
Joined: Tue Aug 25, 2009 9:40 am

Post by acegolfer » Fri Mar 26, 2010 12:28 pm

I have 4: 2 at Ally, 1 at ING, 1 at Dollarsavingsdirect.

I diversify just in case one goes down.

acegolfer
Posts: 1570
Joined: Tue Aug 25, 2009 9:40 am

Post by acegolfer » Fri Mar 26, 2010 12:28 pm

livesoft wrote:I have 0 savings accounts. I prefer to invest my short term stuff in short term bond funds. I don't think you should have any savings accounts. :)
I'm interested in this. How do you set up to avoid transaction fees?

Tristrex
Posts: 127
Joined: Tue Mar 09, 2010 7:10 pm

Post by Tristrex » Fri Mar 26, 2010 12:48 pm

I have zero right now, but I'm about to open a savings account at Ally so I have somewhere I can keep my taxes for next year separate and easy to withdraw. My day-to-day money is just in a checking account accessible through a local branch.

User avatar
nisiprius
Advisory Board
Posts: 39793
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Post by nisiprius » Fri Mar 26, 2010 4:42 pm

therub wrote:I have 7 savings accounts at ingdirect.com. It's an awesome and very lazy way to save and budget.
I agree; I have eight! In theory I should be able to do this sort of "mental accounting" just with my own spreadsheet. In practice I've never been able to and find the ING Direct feature extremely helpful.

For those who don't know: once you've established one ING Direct Orange Savings account, you can instantly create another at any time, funding it from any of your existing accounts. You can of course instantly transfer money between any two Orange Savings accounts. There is a limit of four withdrawals a month... but that's per account, so you can use multiple accounts to "cheat" on that limit.

Each account has its own account number, so one potential use for multiple accounts is if you wish to give an account number for direct withdrawals, it seems to me that you could set up an ING Direct account for that purpose and never put more money in it than you intended to authorize for withdrawal.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

User avatar
Swamproot
Posts: 307
Joined: Tue Aug 19, 2008 5:10 pm

Post by Swamproot » Fri Mar 26, 2010 5:32 pm

nisiprius wrote:
therub wrote:I have 7 savings accounts at ingdirect.com. It's an awesome and very lazy way to save and budget.
Each account has its own account number, so one potential use for multiple accounts is if you wish to give an account number for direct withdrawals, it seems to me that you could set up an ING Direct account for that purpose and never put more money in it than you intended to authorize for withdrawal.
I have one specifically for PayPal.

User avatar
Hat
Posts: 53
Joined: Wed Feb 10, 2010 10:27 pm

Post by Hat » Sat Mar 27, 2010 1:00 am

I use one savings account and one short-term bond fund.

Ron
Posts: 6575
Joined: Fri Feb 23, 2007 7:46 pm

Post by Ron » Sat Mar 27, 2010 7:43 am

Swamproot wrote:I thought I would be the weird guy with 7 savings accounts. :-)

I get paid once a month and use them for slots to hold money until the bill or need for it comes due or arises. Sounds complicated but whatever is left over I know I can spend without having to remember what is outstanding.
Sounds logical to me; it's just a variation of the "envelope budget" method (which I've used for the last 40 years) and I was also "paid" monthly both pre and post retirement.

Whatever works for you and keeps you on a good financial track is fine.

- Ron

User avatar
IlliniGuy
Posts: 157
Joined: Sun Mar 04, 2007 4:43 pm

Post by IlliniGuy » Sat Mar 27, 2010 1:21 pm

I use an Excel spreadsheet to subdivide my savings. In theory, I just need one account. In practice I have a few that I've accumulated over the years.

beardsworth
Posts: 2135
Joined: Fri Jun 15, 2007 4:02 pm

Post by beardsworth » Sat Mar 27, 2010 2:34 pm

Sometimes people get so caught up in using spreadsheet software and other highfalutin' technology that they feel defeated and/or (as in examples above) have a vast number of savings accounts, each for a specific purpose, but each of which also generates its own bookkeeping and year–end tax reports.

We have one money market savings account at our credit union. To the front of the monthly statements is clipped a piece of paper, and across the top of the paper are headings for each of our handwritten "spread sheet" budget lines. You can have as many columns as you have purposes for which you need to set aside "dedicated" money (the following are not necessarily ours but are examples): "Vacation," "Roth IRA," "Plastic Surgery," "New Guitar," etc.

One of our own columns is titled "Escrow." We add up all our bills that come on a predictable schedule but only once or twice a year (for example, car property tax, annual charity contributions, termite inspection, performing arts subscription), then divided the figure by 12, and add that amount to the "Escrow" subtotal each month. When a bill comes for one of these expenses, we move the money to checking (by phone or online), cross out the old "Escrow" subtotal on our sheet of paper, and enter a new subtotal reduced by the amount of the transfer. Same if you were to pay expenses out of the "Vacation" or "New Guitar" column for which you'd been setting aside funds each month.

So: only one savings account with one set of statements and one year–end Form 1099, and a simple hand–made "spread sheet" that doesn't require a computer, software, or electricity, and can't malfunction unless the ball point pen runs dry or the page fills up and we have to start a new one––either of which is a "hardware" problem easily and cheaply remedied.

We value simplicity whenever we're able to practice it.

Marc
Last edited by beardsworth on Sat Mar 27, 2010 3:35 pm, edited 1 time in total.

Juan
Posts: 200
Joined: Mon Sep 15, 2008 10:04 am

Post by Juan » Sat Mar 27, 2010 3:09 pm

acegolfer wrote:
livesoft wrote:I have 0 savings accounts. I prefer to invest my short term stuff in short term bond funds. I don't think you should have any savings accounts. :)
I'm interested in this. How do you set up to avoid transaction fees?
I'm curious about this too. I have bi-weekly deposits.

I haven't found the yields & transaction fees to be a better deal than some of the high-interest savings accounts I get with online banking, but I haven't checked in quite some time. How did you set it up?

frogamigo
Posts: 27
Joined: Thu Jan 28, 2010 1:08 am

Post by frogamigo » Sat Mar 27, 2010 3:39 pm

2 savings accounts.

One linked to my checking account - I use it to 'hide money' from myself, and it's also a cushion for overdraft protection purposes.

Another through ING for the "real" emergency money or saving up for large purchases.

Post Reply