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Do I Need a Savings Account?

How to structure your bank accounts for peace of mind.

There are a lot of reasons why people don’t start a budget, but I think the biggest culprit is often the perception that budgeting will take a lot of work. You’ve got to spend time thinking about your priorities (and that’s the real work), make decisions about your savings goals, and you’ve got to budget when you get paid. But the worst of it is keeping up with all those accounts, right?

We find that a lot of people struggle with budgeting because they just have too many accounts to keep up with. It’s easy to reconcile one or two accounts every day, but most people have a lot of accounts. Pretty much all of us have a savings and checking account at the very least. But some have multiple checking accounts—one for bills, another for fun money, and another for everything else. 

Then there’s credit cards. Every company seems to be in the credit card business now, and you can’t avoid their sales pitches whether you’re buying clothes at Kohl’s or trying to get a little sleep on an American Airlines flight. And there’s always a new card offering rewards that are just a little better than what you have now. It’s no wonder we end up with so many.

Savings accounts are the big culprit though. Some have six or seven of them! One for taxes, one for the emergency fund, one for that Disney vacation, that online savings account they got for the sign-up bonus, and so on. We often call this “budgeting with accounts” and a lot of people do it. Without a budget, there’s just no way to keep track of all your savings dollars other than divvying them up to an ever-growing number of savings accounts.

The Cost of Too Many Accounts

What people don’t realize is all this craziness has a cost—and I don’t just mean bank fees (which can really add up, by the way). The real cost is your time and your energy. Managing that many accounts takes a lot of both. And you do have to keep up with them, whether you’re budgeting or not. What with managing a dozen transfers every paycheck, making sure we don’t accidentally overdraft anywhere, and remembering what account is for what purpose, it can be a nightmare. 

So why are we, as a culture, so focused on accounts? Well, because we all need a budget, but most of us don’t have one. We all need some kind of a structure to manage our money. Most financial institutions aren’t that interested in helping people budget (it might cut back on their super-lucrative overdraft fees), so the only tool they offer to provide that structure is more accounts (which, of course, comes with more fees to pad their accounts). 

But there’s a better way. 

Trust Your Budget and Close Some Accounts

Your budget can provide the structure you need, and you don’t need so many accounts. And if you’re worried about accidentally spending money if you don’t hide it away in a savings account, you don’t have to be. Your budget solves that problem too (and does a better job of it, to boot). If you trust your budget and make your spending decisions by looking at your categories, not your account balances, your budget will protect your savings dollars.

If you trust your budget and make your spending decisions by looking at your categories, not your account balances, your budget will protect your savings dollars.

So when people avoid budgeting because they’re afraid of actively managing a dozen accounts, they’re operating under a false assumption. With a budget, you don’t need such a complex account structure. Imagine if you only had a couple accounts to deal with and your budget provided the structure you need to manage your money. You wouldn’t have to spend so much time on chasing fees and transfers and you could spend more time on what’s really important—deciding what you want your money to do for you. 

But Why Stop There?

In fact, aside from a few situations where a separate account is absolutely necessary (HSA’s, retirement accounts, money market accounts, etc.), you really only need one account.

That’s right. I’m just going to come right out and say it—if you have a budget, you don’t need a savings account at all.

All your money can sit happily in your checking account while your budget keeps track of the jobs they have to do, whether that’s saving for a new car, buying groceries this weekend, or just sitting around indefinitely in case you suddenly lose your job.

But what about interest? Well, yes, it’s nice to earn interest on the money you’re saving anyway. That’s why for the past 15 years at YNAB, we’ve recommended folks keep one checking and one savings account. But we’ve always dreamed of the day when we could cut that down to just one account. In fact, in a similar blog post from way back in 2010, Jesse said this: 

“Honestly, if I could find a checking account that paid a higher interest rate, I’d have one account and let my budget take care of everything else.”

Ladies and gentlemen, for many of us, Jesse’s dream has become a reality. Many legitimate online banks are offering checking accounts with 2.25+ percent interest rates (at the time this blog was written). SoFi Bank and Aspiration Bank are just a couple of the more-popular options not to mention a host of smaller, regional banks and credit unions that can sometimes do even better. Now, these may not be right for everyone, but they could be just right for you. I myself just opened one of these high-yield checking accounts and I’m very excited to finally achieve the ultimate YNAB goal of having just one account for all my savings and checking!

So what about you? Is your account structure giving you a headache? Why not start by closing just one account today. And if you do, let us know on Facebook, Instagram, or Twitter. We’d love to hear from you. 

Interested in learning more about how to save money? Check out our comprehensive guide.

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Do I Need a Savings Account?