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Money for Life work in partnership with the Money Advice Service, an independent organisation set up by government. Money AdviceService provides free, unbiased money guidance across the UK to help people make the most of their money.  If you have a question or need help, you can chat to them here.

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Which savings account should I put my money in?

By Tyrone Huggins

Want to start saving but unsure what to look for when opening a savings account? With so many different types out there, the choice can be confusing. First things first, if you’re looking for somewhere to stash your cash, research and compare! Accounts vary widely in terms of what they offer and the right one often depends on your financial circumstance. Here are some basic things you need to know in order to make the best decision for you.

 

Easy access accounts –

If you’re wanting to build a rainy-day fund which you can dip into whenever you need, an easy access account is a perfect choice. These are flexible accounts which allow you to save at your own pace and make withdrawals frequently. They’re great for unexpected emergencies or savings that you plan to use in the short term. On the flip side, interest rates are usually very low, so you won’t earn as much on top compared to other types of savings accounts. Some accounts may also have restrictions on withdrawals per year, which if you exceed could cost you a penalty, so always read the small print before applying.

 

Notice Accounts –

If having quick access to your savings isn’t a top priority, you might want to consider a notice savings account. As the name suggests, these accounts require you to give advance notice periods (typically 30-120 days) if you intend to make a withdrawal. This is great if you’re saving for a specific goal like a holiday, but struggle to be disciplined, as it removes the temptation of dipping into it in the spur of the moment. Another benefit is that they can offer higher interest than easy access accounts. However, most of these accounts usually require a minimum deposit of at least £1000. There is also a risk of being penalised if you don’t give notice in advance.

 

ISA Accounts –

Individual Savings Accounts (ISAs) work much like any other savings accounts, except any interest you earn is tax-free. Interest rates can be fixed or variable, meaning they may change over time. ISA interest rates are usually higher than most other types of savings accounts and you’ll still get instant access to your cash. On the downside, there’s a limit to how much you can deposit into an ISA each tax year, and the best interest rates are rewarded on the condition you don’t withdraw within a specified term. For this reason, ISAs are best suited for long term savings goals such as for retirement.

 

Fixed-rate accounts – 

Fixed-rate bonds are accounts that allow you to deposit a single lump sum for a set period. This can range from a minimum of six months up to five years or even more.  You won’t be unable to access your money for the duration of the term. The interest is applied at a fixed rate which means you won’t be affected if interest rates go down. It’s a good choice if you have a large sum of money you can afford to set aside long-term without touching. But if you don’t have at least £1000 to put in, then a more flexible account such as easy access or regular saver might be best.

 

Regular savings account

When you open a regular saver account, you have to commit to paying a specified amount of money into the account each month for an agreed period. These amounts vary from bank to bank but typically range from £200-£500 a month. If you have a steady source of income for the fixed monthly commitment and want to build up a pot of savings reasonably fast, this can be a good option – but it’s not the best choice if you need emergency access to your money.

 

So, to summarise if you’re thinking of opening up a savings account first think about your goals – what are you saving for and when will you need to access the money? Next research and compare then once you’ve found the right account for you, it’s time to save and jet off to that dream holiday!

 

Heard talk about investing not saving? Read what we have to say on the topic here. 

 

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Money for Life work in partnership with the Money Advice Service, an independent organisation set up by government. Money AdviceService provides free, unbiased money guidance across the UK to help people make the most of their money.  If you have a question or need help, you can chat to them here.

Launch Chat

Chat to the Money Advice Service
Monday to Friday, 8am to 6pm
Saturday, 9am to 1pm.