How Multiple Accounts Can Transform Your Savings

By Martin Mulindwa Seguya

Creating a healthy savings culture is one of the most dependable ways to improve your finances.

The path to building wealth involves three simple stages: earning money, saving money, and growing money.

The first stage is about having a source of income, because you can’t save what you don’t have. The second stage, Saving, begins once you have a steady income and commit a portion to savings.

This is essential because spending all your money can leave you living paycheck to paycheck, making it difficult to reach goals that require a lump sum.

Once saving becomes a regular habit, investing becomes a much easier, as most investments generate capital from Savings.

While there are many reasons to save, from a short-term trip to a long-term home purchase, having multiple goals means you need more than one account to manage them effectively.

Why You Need More Than One Savings Account

Goal-based saving is the most effective way to reach your financial targets. Since different goals have different timelines and financial needs, a single account cannot cater for all of them. When I began my personal finance journey, I kept all my money in one account, and I soon realized that an unexpected expense could wipe out my entire savings, leaving me without funds for other needs. This is why dividing your money into “small pockets or baskets” is essential.

For me, the two most essential savings accounts are;

Emergency fund and sinking funds.

An emergency fund is necessary because you never know when a crisis will strike. On the other hand, sinking funds are for specific expenses like travel, car expenses, or even children’s school fees.

Here are five reasons why having multiple savings accounts will work for you:

1. It’s Easier to Track Your Progress

When you have a specific account for a specific goal, like an emergency fund, tracking progress toward your target is easy. Separating your goals into different accounts lets you see how you are doing with each one and helps you determine where to allocate your income. It also allows you to automate your savings, making it easier to stick to your plan. This way, you can see if you are slacking on one goal or focusing too much on another.

2. It Reduces the Likelihood of Overspending

Keeping all your money in one account increases the risk of spending it on unplanned items. Having dedicated accounts for specific purposes, such as an emergency fund, prevents you from using that money for non-emergencies. For example, if you have a travel account, you cannot commit to a trip unless there is money in this account. This discipline helps you manage your finances better and allows you to enjoy your money guilt-free because it is used for its designated purpose.

3. It Aids in Easy Decision-Making

Knowing where your money comes from for each expense, such as holiday costs or school fees, makes financial choices much easier. You don’t need to second-guess where the funds for a specific goal will come from. This organized approach enables you to make informed decisions on a monthly, quarterly, or even semi-annual basis, helping you understand precisely what you are working towards and where your focus should be.

4. It Lets You Take Advantage of Interest Rates

Having multiple savings accounts allows you to earn interest and other benefits. For example, you can open a https://www.centenarybank.co.ug/product/cente-savings-account/6/5  with Centenary Bank in Minutes through the CenteMobile app, and start saving immediately. The account also allows you to access loans and unrestricted withdrawals (subject to the minimum balance).

5. It Boosts Motivation

Seeing your progress in each of your accounts can be very motivating. When you log in and see your emergency funds grow or your lifestyle account on track, it lifts your spirits and encourages you to keep going. When you observe the progress of your goal-based savings, it makes you feel highly motivated.

How to Manage Your Accounts

Managing multiple savings accounts can seem daunting, but there are two key steps. First, decide exactly how you will use each account. You should determine your needs and how each account will serve them.

Second, decide how much you want to allocate to each account. This requires having an effective budget where you can list your projects and set monthly targets for each. If you tend to forget, you can set up standing orders to automatically deduct and transfer money to each account when your income arrives. Lastly, review your monthly statements to check for any charges and ensure your money earns interest.

The Writer is a Chief Manager Personal Banking at Centenary Bank

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