Why You Should Have More Than One Savings Account Right Now
Why You Should Have More Than One Savings Account Right Now
By MICHAEL BROMBERG Published June 13, 2023
One of the many consequences of the Federal Reserve's aggressive series of interest rate hikes since March 2022 has been a sharp increase in the yield you can earn in your savings deposits. Today, the top high-yield savings accounts pay an annual percentage yield (APY) of 5% or more, while rates on the top money market accounts are as high as 5.25%.
If you currently have a single account that does not match these payouts, it may be time to consider opening a new one or a secondary account—even if that means turning to a new bank or credit union.
Benefits of Multiple Savings Accounts
The current high-rate environment represents an ideal opportunity to reevaluate your savings plan. If you've been stashing your savings deposits in the same account for at least a few years, it's worth checking that the current APY you're earning is competitive with today's top rates.
Opening multiple accounts could be one way to ensure that you're maximizing the potential of your savings by earning the top yield. The flexibility of having more than one account can also help you manage fluctuations in interest rates, which could be important when the Fed eventually pauses its hikes and rates begin to move lower.
In addition, by splitting your savings into more than one account, you boost the amount that can be covered by the Federal Deposit Insurance Corporation (FDIC). The FDIC guarantees your deposits up to $250,000 per individual per institution, so opening several accounts can multiply the deposits that you're entitled to have insured.
Holding your savings in multiple accounts can also be a way to help you stay on track to meet specific goals. For instance, if you're saving for a down payment on a house, you could open an account where you set aside money specifically for that purpose. This could help you avoid the temptation of spending these funds on other things.
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