Is it Wise to have lots of Savings Accounts?

Many of us like to save money so that we have some money to fall back on. It can be a great feeling knowing that there is some money available if we need it, perhaps to pay a bill that we had forgotten about, cover the cost of replacing something that has broken or for any other emergency. Some people do rely on loans for this, but there is a great peace of mind to be had by knowing that you will have the money yourself and not have to borrow it, which can be expensive and sometimes difficult to organise, especially at short notice.

A question that may occur to you though is whether it is best to have just one savings account or whether you should have several. It is an important thing to consider as different accounts have different rules and different benefits. Of course, you do not want to be in the situation where you have so many accounts that you lose track of where your money is, but having different types of accounts could give you different benefits. There is a big difference between the interest paid on different types of accounts, for example.

An instant access savings account will allow you to draw money out whenever you wish or to transfer to other accounts. They tend to pay a small amount of interest and they can be a great idea for putting money that you may need at a later date, perhaps a small emergency fund or money you are saving up for something you want to purchase soon. They can good for popping money into during the month and then taking out again when you need to pay your credit card or if you run low on funds. For this reason it can be handy to have an account with the same bank as your current account so transfers are instant.

However, if you want to earn more interest on your savings, then it could be wise to choose different types of accounts. There are accounts where you have to give notice to make withdrawals, perhaps a month or so and they will pay more interest. You can sometimes still withdraw funds without notice, but have a penalty on the interest that you will be entitled to. If you want to tie your money up for longer then a bond might be the right thing for you. These tend to have a fixed rate, although not always and will last for a certain time period, perhaps a year or several years. These can be a gamble in a way as the interest rates may go up above the fixed rate and you may feel that you could have done better putting your money elsewhere. However, if you only invest for a short term, you should be able to make a fairly reasonable prediction of what interest rates are likely to do and therefore judge whether you think this is a reasonable rate to tie your money up in.

It is therefore worth thinking about why you are saving money and whether it is something that you will need in the short term or the long term. It is worth comparing rates and thinking about whether you are happy to tie money up or give notice to make withdrawals. You will also find that there is a difference in rates between different banks for similar accounts and so it is worth thinking carefully about which one you might use. It can also be wise to spread your money between different places as if one doesn’t do so well and end up with uncompetitive rates, for example, you will have money elsewhere which could potentially be doing better.

Just be sure that if you do get multiple accounts that you know where your money is and how much you have. It is not good not knowing what you have and how much and also, if you need money, you will not know where all your money is so may find it hard to get hold of what you need. It is easy enough to keep note of the accounts and the amount of money in each so that you do not lose track.

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