A savings account is an account maintained by the bank, which pays interest. Picking the right savings account is important, as it can hugely affect how fast savings grow.Read on to find out more and make the choices that get your money working as hard as possible.
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What types of savings accounts are there?
Short for ‘Individual Savings Account‘, an ISA works in much the same way as an ordinary savings account. Other accounts may incur income tax on any interest earned, but this isn’t the case with an ISA. The trade-off for this is a limit on how much to can pay into an ISA account each tax year – £20,000.
Easy-access savings accounts
As the name suggests, these accounts offer unrestricted access to your cash. You might see these accounts referred to as a ‘instant access‘ or ‘no-notice‘ account. In return for this greater flexibility, you’ll often get lower returns than are with other accounts.
With a notice-savings account, you’ll have to notify the account provider before you make a withdrawal. This is good for those who can afford to wait, paying better rates on the whole than easy-access accounts. It’s worth being aware of how much you’ll pay in penalty fees if you withdraw without notifying the provider though!
Regular savings accounts
These are good options for those looking to drip feed money into a savings account every month, and keep it out of sight. They generally offer competitive interest rates, but the trade-off here is that you’ll have to stick to the agreed maximum and minimum deposits each month. Failing to pay in on a given month can lead to penalty charges.
Fixed rate bonds last for a set period of time. Over this period, the interest rate will stay the same regardless of any external factors, such as the Bank of England changing the base rate.
Help to Save accounts
These accounts will be introduced in 2018, offering lower paid workers a government bonus of up to £1,200. The scheme will see those eligible able to save up to £50 a month and receive a bonus of 50% – a maximum of £600 – after two years. Savers can continue to use the scheme for a further two years and earn up to another £600.
How do I compare savings accounts?
- Look for high or competitive interest rates. Your interest rate is your return and reward for keeping your money in the bank. Getting the highest interest rate will mean your money will work harder for you.
- You want low fees. Most banks nowadays don’t charge a monthly fee for maintaining a savings account. If you’re currently paying a monthly fee, then you need to assess whether the savings account is worth the free.
- You might want easy access to your money. The level of accessibility to look for depends on your preferences and personal savings goals. While many savings account allow you almost instant access, some require that you plan ahead for when you are going to want to access your money.You should be rewarded for constantly saving
- You should be rewarded for constantly saving. If you find that your savings account balance is building up, but you’re still getting a less-than-average rate; then it could be time to switch.
What is the FSCS?
Short for Financial Services Compensation Scheme, the FSCS protects customers when financial services fail. Look out for their logo on the financial products you’re comparing.
Since 2001, the FSCS has helped millions of UK customers, paying out billions of pounds. If a firm has stopped trading or does not have enough assets to pay up, the FSCS will step in to protect customers.Back to top