After using a high-yield savings account to earn 20 times more on my money, I’ve figured out the perfect system to have cash for everything I need — and want

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• I opened a high-yield savings account about a decade ago, and I’ve been refining my savings strategy ever since.
• I have not only an emergency fund and a travel fund, but also separate savings accounts for business and personal needs.
• I’ve found separating and naming my different accounts according to their purpose gives me peace of mind.

I’ve saved money in a high-yield savings account for more than a decade, opening my Capital One 360 account back when it was ING.

I originally opened a savings account because of the higher-than-average APY at the time, to set money aside as I was starting my financial journey. High-yield savings accounts typically pay at least 20 times the interest of a traditional savings account, and the best rates now are even higher.

Over the years, I’ve refined my savings strategy. Here’s how I make the most out of my high-yield savings accounts. 

The problem with one savings account 

When I first started saving in my early 20s, I had one savings account. I wanted to have money set aside for emergencies or anything else that I might need money for. I had a pot of cash in savings — let’s say several thousand dollars — and yet, each month it seemed like there was a reason to dip into my savings. 

Having one lump sum of cash didn’t give me any clarity or goals as to what I should use the money for. So I constantly found reasons, some legitimate and some not, why I needed to tap my savings. I finally realized how ineffective this strategy was and branched out to targeted savings accounts. 

Targeted savings accounts made all the difference

I realized that my bank gave me the ability to open up to 25 different savings accounts — and nickname them. I decided to get more specific regarding what my savings were actually for. 

So I opened one account and named it “Emergency Fund.” I opened another account and named it “Travel.” A few years ago, I created a “Moving” savings account when I moved back to Los Angeles from Portland, Oregon. 

Being self-employed, I also have a “Biz taxes” savings account, “Vacation,” and “Sick as a Dog” funds. I have to pay my own taxes so I set aside more than 30% of each check toward business taxes. 

After my first year of self-employment, I realized how scary it was to get sick. I realized I felt worried on vacation. Why? Because being self-employed, I don’t have any benefits. If I don’t work, I don’t get paid. 

When you’re sick or on vacation, stressing about money is the last thing you should be doing. So I decided to take action and fund my own benefits. Having a buffer of cash in case anything happens has given me peace of mind. I know that if I have to say no to certain assignments or take on less work because I’m not well or on vacation, I can do so and still pay my rent. 

Being hyper-specific about what each savings account was for gave me clarity and focus. No longer could I dip into these accounts and find a reason to use the funds. The goal was clearly stated and I knew what it was for. Having separate accounts and naming them made the process of saving much easier for me. Not only that, but it inspired me because I knew what I was saving for instead of just saving in general. 

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I set goals for each account, and automated my deposits 

The first thing I did with each of my savings accounts is to figure out how much I wanted in each account. For example, I knew I wanted at least $10,000 in my emergency fund. For travel, I calculated prospective costs and the time I had to save. Once I had an idea of what I wanted to save, I managed those goals with Capital One 360, which used to allow you to set a goal for each account and see a progress bar. 

On top of that, I automated my savings every month so I had no excuses. Every month, I have a set amount that gets transferred from my checking account to my emergency fund and travel fund. Depending on my income that month, I’ll manually transfer money at the end of the month to my Biz Taxes account, Vacation, and Sick accounts. 

Automating some of my savings and setting up a money date at the end of the money to manually transfer more money keep me accountable to my savings goals. 

Saving has given me peace of mind

Being clear and specific with my savings goals has transformed my financial life for the better. I am more clear, focused, confident, and know exactly how each dollar is used. Not only that, but it has given me peace of mind to know that I have money in the bank and that I’m prepared for a variety of situations. I’m not just saving for emergencies, either — but the fun stuff, too. Having multiple savings accounts has helped me be financially well-rounded and save for what I need … but also what I want. 

This article was originally published in August 2019.