In many ways, these reserve accounts play a significant role in one’s finances in SA. They provide a safe way to reserve cash and obtain interest while managing the funds for short- or long-term goals. Most ask whether a person can have numerous savings accounts and if this will be lucrative. This post covers how many of these profiles a person can have, the possible disadvantages of maintaining multiple savings accounts, and whether splitting your savings among banks is a good idea. Thus, this post should enable you to make informed decisions on handling your money.
Is There a Restriction to the Number of South African Savings Accounts You Can Have?
For savers in SA, there is no legal restriction on the number of these reserves one can operate. Banks do not have any limits as far as the many accounts you can own are left to one’s discretion. Still, each bank has its policies regarding the number of accounts you can open and the minimum balance, among other conditions, for each account. Therefore, although you may open as many reserve accounts as you want, you must fulfill each profile’s bank terms and conditions.
Is There a Con to Opening Multiple Savings Accounts?
While several advantages come with several reserve accounts, such as separating financial goals and taking advantage of different interest rates, there is also the other side of the story. One of the main concerns is a situation when it is necessary to operate several accounts simultaneously. It implies management, such as tracking each account’s balance, transaction history, and interest received. This can get complicated if the accounts are at different institutions; it invites oversight, failing to meet deposit requirements, or overlooking fees that may build up over time.
Another disadvantage can be additional fees one can amass. Most savings accounts, especially those with higher interest rates, require a minimum balance in the account or monthly fees unless specific requirements are met. Various accounts equate to various fees; some of those accounts may not be able to meet the minimum balance requirements for generating extra costs that nibble at your savings.
Besides, too many accounts can thin out the general interest that could be earned on cash stretched across several accounts. Most savings accounts in South Africa offer tiered interest rates, which means the more money you have in the account, the better the interest rate of return you may qualify for. In contrast, the more divided your savings accounts are, the more equally reduced your acquired earnings are, and the more you risk getting less reasonable interest rates. Therefore, weigh the pros and cons of multiple reserve accounts.
Is It Bad to Keep a Lot of Cash in Savings Accounts?
Though these profiles offer safe and secure areas where one could place their money, keeping a large sum of money in them is not often the most financially prudent. However, the accounts tend to be low interest compared to SA’s other investment avenues, such as fixed deposits, bonds, or unit trusts.
The interest earned in these profiles may not keep up with inflation, and though your funds are secure and liquid, your cash’s purchasing power could significantly decrease over time. Besides, most savings accounts are limited to the amount against which tax-free interest can be acquired. Interest from income is only nontaxable in South Africa up to specific amounts: R23,800 per year for individuals below 65 and R34,500 for those above 65. If you retain large sums in your savings account and the interest earned exceeds this limit, you must pay tax on the excess interest, reducing the real return on your savings.
Another consideration is that savings accounts allow accessibility to your money and liquidity- features that sometimes tempt you to take from it unnecessarily or spend it impulsively. If you have a massive amount of cash, you may be more endlessly tempted to dip into your savings, thus hindering long-term financial goals.
To those big on saving, it will be wiser to diversify into other investment vehicles that pay better over time while still retaining some portion in savings accounts for disasters or any other short-term financial needs. In balancing your savings between account types, you maximize growth on your funds while keeping those same funds secure and accessible when needed.
Should I Split My Savings Between Banks?
Splitting your savings between banks is often a good idea for various reasons. This helps minimize risk and map out better rates of interest and lane usage of different banking products. One of the reasons for spreading out savings among different banks is to lessen risk exposure. Even though the South African banking system is generally very secure, as a rule, and the related laws and regulations are adhered to, the unexpected- for example, the liquidation of any bank- may still happen and affect your money. You diversify your risk by spreading money among several institutions and lowering the potential impact of any one bank’s failure.
A second benefit to divvying up your savings among banks is capitalizing on the different interest rates and critical comparative features of accounts. Other banks may offer better interest rates, excellent fee structures, or unique promotions to help grow your savings even more effectively. By shopping around and comparing what different banks can offer, you can help make sure your money works harder for you. However, weighing those added benefits against the added complexity is essential.
Keeping multiple accounts at different banks involves keeping track of logins to various sites, statements per each, and deposit requirements per each. You should be mindful of balances you may be required to maintain and any fees you could become subject to if you fall below the minimum balance.
To split up your savings, you should approach this technique with a plan to shift your money around according to what needs to be addressed. In other words, you will transfer it according to the goals you want to tackle-for example, if you need an immediate emergency safety net, you put it in a high-access, low-fee savings account; if you can allow longer-term savings, you can place those in a bank with higher interest. This is how you can get the advantages of splitting your savings without losing track of what’s happening with your money.
