The benefits of multiple savings accounts

Possessing multiple savings accounts can help individuals to secure the best savings rates on their wealth, as well as having a number of other key benefits.

You can currently open as many savings accounts as you need and there are advantages to owning more than one, making it an option to consider for those hoping to improve their short and long-term financial situation.

One of the main reasons to have multiple accounts is because it allows you access to the best savings rates, as you will not be isolated to just one bank or building society.

This means you can switch your cash between several institutions, taking advantage of the best offerings or promotions available.

For example, when you are thinking of becoming a new customer, many banks will give you preferential rates or services to entice you to open an account.

However, once you have been with a company for some time, they will cut these benefits and move you to a less favourable option.

If you have multiple accounts, you can approach your provider for a better deal, as they will be reluctant to let you move your funds to a competitor.

This also protects you from new policies that may be introduced, such as administration fees, withdrawal penalties or checking charges, as you can simply move your money around to a different account.

Thinking of switching to another savings fund? Inform your bank manager of your decision as they may offer you reasons to stay rather than lose your business.

Another key benefit to owning multiple accounts is that it can prevent worst-case scenarios should you become a victim of identity theft.

Having your money spread across several accounts means that your entire savings cannot be taken from a single source if one of your cards is stolen.

Whereas, if you possess just a single account, not only could you lose all of your cash, but you may also suffer additional charges from your bank if you exceed your overdraft or are unable to cover the cost of cheques you have written.

If you do have multiple accounts, you can simply transfer additional funds to the compromised account - making sure to cancel your card first - which will guarantee your balance remains within a manageable range.

Last but not least, having several accounts can help you to structure your finances better, particularly for those who forget to calculate for large annual bills when totting up their monthly payments.

For instance, car premiums, MOTs, birthdays and building and contents insurance can be forgotten until the time comes to pay for them, making it a last-minute scramble to generate the required funds.

However, by opening a few extra savings accounts, you can have a separate stream of money for each large outgoing, meaning you will not need to spend money from your current account in emergencies.

The easiest way to do this is to add up the total of these annual payments and then divide this number by how many times you get paid each year.

You can set up a payment plan so that this amount comes out of your current account on payday, guaranteeing you are fully prepared for any bills that come through at unexpected times.

This setup also means you will not be tempted to spend the money, as it is safely squirreled away before you have a chance to withdraw it.

One thing you will need to remember is to adjust the amount you transfer should your incomings or outgoings change, such as getting a promotion or rising energy prices.

These kinds of savings accounts should not be considered untouchable, as you are merely putting the money aside with the intention of spending it on bills, which is a fantastic way of managing your cash and can help you to build up long-term savings.

There are a currently a number of online accounts that allow you to compartmentalise your savings goals in this way, although they are ultimately still part of the same account.

Under these accounts, you will have a separate sub-account that can be designated with a special money aim - such as raising funding for a house deposit or buying a new car.

Alternatively, you can opt for ISAs, which offer favourable interest rates, tax benefits and the flexibility to access your money when you need it.

Savings interest rates 

Moneyextra.com recommends you take independent financial advice before acting on any article

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2011-09-14 08:06:58 © Moneyextra.com