Savings aren’t just for the super-rich.
Everyone should get into the habit of budgeting and putting something away for a rainy day.
Savings accounts let your money grow by adding interest – but don’t get complacent.
Check in on your savings regularly to make sure you’re on the best interest rate you can get. If you’re not, vote with your feet and switch.
You want your money to earn as much interest as it can while giving you the access you need to your cash.
The simplest option. Pay your money in, earn interest, and withdraw it whenever you like.Read more >
You agree not to touch your cash for a set time - typically between six months and five years.
In return, the provider guarantees you a fixed rate of interest.
You save by loaning money to customers using peer-to-peer sites – you earn interest on your savings from what they pay on their borrowing.
Rates are often attractive, but P2P isn’t risk-free as your money won’t be backed by the FSCS.
These have an initial promotional period with an attractive interest rate.
Once the promotion period is up, rates often plummet.
It’s wise to set a reminder for when the bonus rate ends so you can move your savings to an account that pays higher interest.
You pay in a set amount of money each month and get into the habit of putting money aside.
You sometimes need to hold a current account with the same provider and they typically offer competitive interest rates.
They generally only last 12 months though – after that your money’s moved to a current account or alternative savings account.
Five tips to get more from your money.
Basic rate taxpayers get the first £1,000 of savings interest tax free, so you could put away up to £62,500 a year at 2% AER before paying any tax. Though the tax benefits will depend on your personal circumstances
Locking away your money can mean better rates. Worth considering if you know you don’t need cash for several years
Banks like knowing where the money is - a notice account might offer competitive rates
Commit to putting money aside each month for some of the better rates on the market for smaller sums of money
Interest rates don’t stay the same forever - you might find better rates by moving
Compound interest simply means interest is paid on interest. For savings and investments you can maximise gains by leaving interest in the account, and for loans and other debt, high interest and minimum payments can quickly increase the amount owed.
AER stands for 'annual equivalent rate' and shows the percentage interest you’d get if you put your money in an account and left it there for a year.
It lets you compare the interest rate of one account to another.
You get £85,000-worth of Financial Services Compensation Scheme (FSCS) protection per institution you save with, as long as they’re UK regulated.
So if you’ve got more than £85,000 in savings you might want to split your money between several financial institutions to be on the safe side.