Why you might need multiple savings accounts

Put your savings in more than one basket

Opening multiple savings accounts has a variety of benefits, including being able to secure the best savings rates on the money you put away.

There is no limit to the number of savings accounts you can own, and possessing more than one can be advantageous to not only how much cash you intend to put aside in the long-term, but for upcoming expenses as well.

For example, many people may find that they do not calculate for big yearly payments in their monthly outgoings.

This can include car insurance premiums, MOTs, house cover or birthdays, meaning that when the time comes to pay out for these occasions, you can be left scrambling for additional money.

However, this can be combated by opening new accounts for these purposes, with money being diverted into different savings funds without having to delve into your current account.

Simply calculate how much these annual costs come to and divide it by how often you get paid, whether that is weekly, bi-weekly or monthly.

This means on each salary day, a portion of your wage will go towards these accounts, ensuring you are ready for when a big bill comes through your door.

Additionally, with the cash out of sight, you will not be tempted to spend it - although you may notice your weekly spending money goes down a little.

All you need to do is remember to update your transfer amounts should particular expenses go up or down.

While many individuals do not feel comfortable spending money they have designated as savings, having multiple accounts can help you to organise your finances more appropriately, so that you do not have periods of time where you are very low on cash.

If you are looking to improve your money management, many online banks provide sub-savings accounts, which act directly under a main savings account, but can be used to compartmentalise certain aims.

This means you can have separate accounts for different money goals, whether it is saving up for a deposit on a house, purchasing a car or just buying a new laptop.

Another bonus is the ability to secure great savings rates, as you will not be tied down to just a single bank or building society.

By opening multiple accounts, you can benefit from switching money between providers should their rates on savings begin to dip.

Many organisations will provide enticing promotions for new customers, but once you have been with a bank for a certain period of time, you will be moved off these privileged rates.

However, by keeping a number of accounts open, you may be able to haggle a better deal from your bank, as they may not want to lose your business to a competitor.

You can also avoid new policies that certain banks may have that could be unfavourable for your savings, such as checking charges, withdrawal penalties and administration fees.

Simply move your money to one of your other accounts and inform your bank why you are switching - the financial institution may offer you encouragement to stay.

Owning multiple accounts can also protect you from identity fraud if your card is ever stolen.

Keeping your cash spread across a number of savings accounts stops all of your money being taken from one place in the event that your primary card is compromised.

If you do only have one account, in a worst-case scenario all of your funds can be stolen and you could experience bank charges should you go over your overdraft or cheques bounce before your money is refunded.

However, with multiple accounts you will be able to transfer money to the affected account - after you've cancelled your card - to ensure your balance remains in a healthy position until the issue is resolved.

You will also have the opportunity to take advantage of ISAs on top of your standard savings accounts, with these products giving beneficial interest rates and tax advantages and enabling you to diversify your portfolio.

One thing to remember is that opening multiple accounts is ideal for making your life easier, but make sure not to have too many, as you may find yourself getting confused about how much money you have and where it is.

Savings interest rates