How Multiple Bank Accounts Can Help You Reach Financial Goals

Personal finances are rarely neat and tidy. As much as we try to budget and plan everything, life happens. And when we grow and change, our financial priorities do, too. One day we worry about paying the rent and buying food, and the next we're planning to buy a house, have kids, and pay off debt—all at once. Planning for these expenses can feel overwhelming at best and, at worst, impossible—but it's not.

If you're simultaneously working toward several financial goals (as most of us are), using multiple bank accounts may help you get organized and feel in control. We tapped financial experts for the best way to do this, including how to stay organized when juggling multiple accounts and how this method can even make you money in the long run.

Why You Should Use Multiple Bank Accounts

The key to why separating your goals into different bank accounts is a good idea is this: priorities. With all your money sitting in one account, it can be hard to know exactly where and how to spend it, making it difficult to prioritize one goal, let alone multiple.

On the other hand, multiple bank accounts can help you "keep the goals separate and prioritize how much and how often you save for them," says Jill Gonzalez, a financial analyst for WalletHub. "It will also ensure that when you tap into those savings, you can do it without worrying that you're taking away money from a different goal."

While it may seem excessive, Gonzalez recommends starting a different savings account for each individual goal—meaning, for example, money for a wedding, house, kids, and travel are separated. "This will make it easier for you to track your progress, especially considering that you need different amounts for each of your goals," she says. "For example, you'd need tens of thousands of dollars for a down payment on a home, while your budget for a vacation could be only $1,000."

The High-Five Banking Method

If you're looking for a more structured approach, consider the High-5 Banking Method developed by personal finance expert Sahirenys Pierce. Pierce's High-5 Banking Method is an organizing system for personal finances composed of five different bank accounts: two checking and three savings.

The first checking account is dedicated to bills, which include housing, utilities, insurance, debt, and such. "Because, hey, we all have bills; we need to make sure that we're prioritizing them and paying them off on time," Pierce says on the Money Confidential podcast.

The second checking account is dedicated to personal lifestyle expenses—everything from home essentials like toothpaste to social outings and date nights. "Even though we all want to pretend that we don't have a lifestyle, we all have one, so we need to embrace it and make sure that we're giving ourselves a realistic budget so we can enjoy doing the things that we love to do," Pierce says.

Then there are the savings accounts. One is dedicated to the emergency fund—three to six months of living expenses (which nearly every financial advisor strongly recommends). Another is for short-term goals, anything you may want to purchase in the next 12 months. The third savings account is for long-term goals to accomplish in over a year.

Pierce knows this sounds overwhelming when first starting out, especially if you don't have the means to fund all five accounts at once. That's why she says it's so important to "start where you're at." If you can't fund all five accounts right away, start with the first three—bills, lifestyle, and emergency fund—as these are the most important. When you're ready, start building on those other two accounts and goals, giving yourself grace along the way.

"Sometimes when it comes to some goals that we want to accomplish, it takes a little bit longer and we don't need to feel guilty about it," she says. "Sometimes you need to pause on a goal, but you want to make sure that you're still funding it and reminding yourself, 'This is something I want to work toward. This is why I'm sacrificing over here so I can continue achieving this goal over here.'"

How to Stay Organized With Multiple Bank Accounts

Of course, financial planning doesn't end once you divide your goals into separate bank accounts and staying organized is the key. Whether using the High-5 Banking Method or dedicating bank accounts to individual goals, Gonzalez says it's important to keep your objectives clear in terms of the amount you need to save and the time you have to reach your goal.

"To stay organized, you should set a date each month on which to check on your savings accounts," she says. "You could also use a budgeting tool or a spreadsheet listing all your savings goals with their respective accounts, target amounts, deadlines, and the amounts you should be contributing each month. This should help you keep track of how much you're saving and how close you are to achieving your goals."

Don't forget to leave some wiggle room, too. "Another part of being organized is tracking your progress along the way and making any necessary adjustments to make sure you don't miss your savings target or deadline," she says. Checking on your progress and allowing room for adjustments lets you customize this financial planning method to suit your lifestyle and goals. While saving for a house down payment for example, you determine that you need to set aside more money each month to meet your intended deadline, so you divert a little less money toward travel.

How to Make Money from Multiple Bank Accounts

Aside from helping you work toward financial goals, savings accounts can make you money over time. To help your money grow while saving, look for savings accounts with a high annual percentage yield (APY), around 0.5 percent. (The average APY is 0.06 percent.)

As explained on NerdWallet.com, "If you have a $5,000 savings balance, choosing an account that pays 0.50 percent will earn you about $25 in a year, while an account paying you the average would earn less than $5. The difference increases the more you deposit and the longer you keep it in the account."

"Another important advantage is that all your savings accounts will be protected by the Federal Deposit Insurance Corporation," Gonzalez explains. That's much safer than that envelope in your underwear drawer.