With so many savings accounts to choose from, it may be overwhelming to find the right for you. What makes things harder is, if not chosen carefully, your savings account could actually be losing you money by earning interest that is below inflation. Many people do not keep an eye on the return they are getting from their savings accounts. This can be avoided by moving but choosing an account can be tricky. Banks and building societies offer savings accounts which differ in flexibility, rates and terms. To help you on your way and to make things simpler, please read our buyer's guide to savings accounts below.
Before thinking about savings we have a few tips we recommend you to look at:
- Always look for safe savings. Avoid risky investments although the higher rate that comes with them. Opt for shorter terms if offered the same rates.
- Your savings are protected by the government for the sum of up to £85,000.
- Make sure you are clear of debts, not overdrawn before you even start thinking about savings. The interest rates on debts are higher than on savings so you will be losing out money if you haven't sorted this out first.
- Work out how much you can put aside each month. Only make plans that will work – don't overestimate your abilities.
- You will still have to pay tax on your savings unless you choose and ISA.
- Make sure you understand the savings accounts you are looking at. Some will offer instant access and no penalties for withdrawals but others will need a longer notice.
- Split your savings into different saving options to benefit from more products. The combination will give you the options to compare benefits and invest better next year.
- Easy access savers – these accounts offer instant access and you could start them with an investment as low as £1. They don't offer the highest rates but are good if you need constant access to your money.
- Notice accounts – they usually require a minimum investment of a few hundred pounds. A notice will be required if you need to access your account and may be a penalty.
- Regular deposit – these accounts require a regular sum paid into them each month. They are not very flexible though.
- Fixed rate accounts – these accounts have a fixed rate for a certain period and have minimum initial deposit requirement. These accounts are good if there are no expectations of the interest rates to go up because then you will be losing out on better accounts. The rates offered are usually higher and if you can afford to lock you money for that certain period then this account is highly recommended.
- Tax free savings – these accounts are known as Individual Savings Accounts (ISAs).
We recommend you to have a looks at comparison websites such as KnowYourMoney and MoneySuperMarket. You will be able to compare rates, minimum deposits and terms very easy and see which account is the best choice for you.
The information on this page is designed to help you understand more and make more informed choices. We do not receive any commissions, instead we are funded from companies that we advertise on our website.