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Lets say I have $100 each month to put in my savings account and that I want to save towards thing A, B, C and D that each cost the same (e.g. $200 each).

I'm not sure if I should have one savings account for all things (put all $100 dollars in to it each month) or have separate savings accounts for each thing (put $25 in each). Each savings account is free.

By doing it the first way I could save up for one thing in 2 months, allowing me to spend it according to the way I prioritize A, B, C or D.

Doing it the second way will make it so I have saved up for all 4 things in 8 months.

What are pros and cons of first saving for one thing vs saving for all things at once?

What are the pros and cons of lumping all my savings so I can take from it when some saving goal is reached (e.g. I have enough for B so I'll spend the money) vs partitioning my money into separate accounts (one for each saving goal) and then taking from each account only when its goal has been reached?


Please notice that I don't want to focus on account management. For the purpose of this question saving accounts are not bank accounts - lets say each account is an envelope (or a sock) with words A, B, C or D on it.

In reality I would be saving towards much more things that cost differently and a lot more. The way I will end up using will fall somewhere between the 2 methods described: allocate money for all things evenly or in proportion to their cost.

  • The best approach is to simply never buy A, B, C, D. Ask yourself - do you truly need them? Almost all consumer goods in our era are: utter, complete, trash. – Fattie Apr 29 '18 at 7:05
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I'm not sure if I should have one savings account for all things (put all $100 dollars in to it each month) or have separate savings accounts for each thing (put $25 in each). Each savings account is free.

The sad answer is that it all depends on you, and whether you think you need the "external" discipline.

At first, I needed the external discipline of separate bank accounts, but now all the money goes in one pile, and I use a spreadsheet to keep track of my multiple savings goals.

One bad thing about multiple bank accounts is that the bank doesn't like it when go negative (aka overdraw) on an account, whereas when using a spreadsheet, you can go negative on one of your virtual funds, as long as the other virtual funds can make up for it.

EDIT: now that you've specified that it's not about account management, the whole tenor of the question is changed.

Now, it's not you but circumstances and priorities.

For example, which should I save for first: semi-annual auto insurance, or annual homeowner's insurance? Naturally, I should save for both at the same time.

When saving for "wants and luxuries", though, we can't answer that for you, since only you can answer how much you value This over That.

Or am I still misunderstanding your question?

  • Thank you for your answer. I made some edits the the OP, could you please take a look? I don't want to focus on dealing with bank accounts in this question – Tadija Bagarić Apr 27 '18 at 7:56
  • @TadijaBagarić I extended my answer. – RonJohn Apr 27 '18 at 8:20
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Having multiple accounts is basically a tool to discipline yourself.

In theory, as these are all your accounts, nobody would stop you from taking the money from all 4 accounts after two months to buy thing A, as well you could save into your one account and wait 8 month to buy everything you want. So it comes down to a question of self-discipline.

I have made good experiences with having a separate savings account and one for wages/cost of living. Taking from the savings is a conscious act then, which I have to justify to myself. It also makes it easy to see if I gain or lose money over the course of the month / how much I have left for cost of living.

Disadvantages of owning multiple accounts:

  • Fees. A lot of accounts come with some sort of fee. If you have many, these fees accumulate.
  • More overhead to keep control over so many accounts.
  • Less flexibility if you have to move your money around first, when you have a big purchase to make.

Advantages of owning multiple accounts:

  • Increased security: If you lose control over one account, the others may still be there.
  • Some savings-accounts come with interest, while others may be more flexible or even some banks may offer you a bonus to open an account with them.
  • As mentioned: Increased self-discipline as it is a mental barrier to spend money from your savings account for the grocery bill.
  • If you save $100 a month, utilizing multiple accounts achieves the same mathematical goal as using one account. Anyway you slice it, you saved $100 per month. The discipline is in the saving not the distribution across accounts. If you want to improve the result, try to find a way to save $125 a month. – Bob Baerker Apr 26 '18 at 11:04
  • @Daniel Thank you for your answer. Could you edit it so it doesn't focus on bank accounts? They come at no extra cost and are here just to explain my main question? – Tadija Bagarić Apr 27 '18 at 5:34
  • @Tadija Bagarić: I am not sure I understand your Question, then. Could you specify which "accounts" you are talking about? – Daniel Apr 27 '18 at 6:33
  • @Daniel I edited the question. – Tadija Bagarić Apr 27 '18 at 7:55
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The obvious advantages with buying them one at a time are

  • You have some of the items sooner

  • Once you buy the items you don't have to worry about maintaining the discipline to keep the savings for them.

The only advantages I can think of for saving to buy all items at once are

  • If they are not really high priority items, and you hit some other emergency that takes precedence, you have money in the bank.

  • If all items are in the same shop and you either have to travel a long distance or pay for delivery, you could save some time/money by buying all together.

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