When it comes to savings accounts, it’s all about the interest rate. You want to be getting the most for your money and watching it grow, rather than having it sit there doing nothing for years on end.
Interest rates are starting to rise again after a tumultuous few years, so it’s the perfect time to take advantage.
Whether you want to be able to access your money easily or are keen to lock it away and forget about it for a few years, shop around and see how different savings accounts stack up against each other.
Choose from the following options to find the right fit for your finances:
If you want flexibility, this could be the right choice for you. You can deposit and withdraw money easily, which makes them a good option for building up an emergency fund.
If you’re looking for the top interest rates on offer, you’re unlikely to find them with this type of savings account.
Similar to a fixed-rate savings account, you won’t be able to access your money as and when you please.
You’ll need to notify the bank or building society a set period of time before you wish to withdraw. This could be between 30 and 120 days.
An ISA allows you to save up to £20,000 per year (6 April – 6 April) without paying any tax.
You can choose between cash ISAs and stocks and shares ISAs, but you can only open and pay into one account each year.
A fixed-rate savings account will place restrictions on when you can withdraw your money.
This means you’ll only be able to access your cash after a certain amount of time, which could be up to five years. You’ll be charged for taking your money out early.
Generally, these types of savings accounts will offer better interest rates than easy-access options and the longer the fixed-rate period, the higher the interest rate.
If you want to save a small amount on a regular basis, this type of account could be just the ticket.
There’ll be restrictions on how much you can deposit each month, but the interest rates are some of the highest on offer.
It’s possible to open a savings account for your child. You may even want to consider a Junior stocks and shares or cash ISA.
These are savings accounts that comply with Sharia law. They do not charge or pay interest as Islamic law forbids people from making a profit by exchanging money.
Of course you want to choose the savings account with the highest interest rate, but you’ll also want to take into account access to your funds and how long you’re looking to save for.
If you’re happy to shut away your money and have no intention of dipping into it for the foreseeable, a fixed-rate or notice savings account may be an option to consider.
However, for those that need the flexibility of being able to withdraw as and when they need to, an easy-access savings account could be the right choice.
To access the higher interest rates on offer, you may want to consider a savings account that locks your money away. More restrictive accounts, like fixed-rate and notice period options, tend to offer the best interest rates and five-year fixed-rate savings accounts will have a better interest rate than shorter fixed-rate period accounts.
Use our comparison service which will show you the highest interest rates available for each type of savings account. You can view the annual equivalent rate (AER) to see the rate of interest over a year.
It’s worth remembering that any interest you earn above your personal savings allowance will be subject to tax. You’ll have to be saving a large amount for this to be a problem though.
For basic-rate taxpayers, this means you can earn up to £1,000 in interest on your savings per year without paying interest, and it’s up to £500 per year for higher-rate taxpayers.
Alternatively, you might want to look at high-interest current accounts, some of which could offer a linked savings account option with a competitive interest rate, too. Watch out for the interest rate lowering after the introductory period ends, you may want to switch when this happens.
On 27 July 2022, the best savings rate available through Go.Compare for an easy-access savings account is from Nationwide at 1.5% and Aldermore offers a five-year fixed-rate savings account with an interest rate of 3.25%.
There’s no limit on the amount of savings accounts you can have, which can be helpful if you want to have a mix of easy-access and fixed-rate options.
It’s also possible to have multiple ISAs, but you’re only able to open and pay into one type of ISA per tax year.
You’ll need to fulfil the eligibility criteria and will need to provide details such as your age and address
Your driving licence or passport may be required, as well as proof of your address and bank account
Decide which type of savings account you want to open based on your financial needs
You may be required to deposit a certain amount to open the savings account
Some accounts require you to pay in at least a minimum amount each month (some also have maximum amounts)
It’s recommended that you save around 20% of your income each month, as long as you’re able to do so without putting yourself under financial strain. You might want to think about setting up a direct debit from your current account to your savings, so you won’t be tempted to spend it.
If this isn’t realistic, just think about putting aside as much as you can comfortably afford from month to month.
Before opening a savings account, it’s always important to check whether the financial institution is regulated by the Financial Conduct Authority (FCA).
If you have transferred money to a suspected scammer within the past 24 hours, you should notify the police using 101.
However, if you suspect an ISA scam, you can contact Action Fraud, who will investigate.
You’re not going to make your fortune with a savings account, however, it’s always a good idea to keep money aside for an emergency or to save up for a big spend rather than relying on credit.
Especially with the rise in inflation and the cost of living soaring, you know your savings are protected and there if you need them.
Unless you’re saving hundreds of thousands, the interest you earn is unlikely to deliver a big payday, so if that’s what you’re after you may want to consider investing, but of course there’s always a risk of losing it all.
There are a few differences between the two types of accounts. For example, you can only open and pay into one type of ISA per tax year, whereas you can open multiple savings accounts simultaneously.
You also can only save up to £20,000 in an ISA each tax year, but savings accounts have no limit (unless it’s a regular savings account).
Absolutely, you’re not borrowing any money to open a savings account so your credit history will not be a factor in the application.
The bank or building society may conduct a soft search to check your identity, but it will leave no mark on your credit file.
The Financial Services Compensation Scheme (FSCS) protects £85,000 of your savings per financial institution. This means that if the bank or building society go bust (provided it’s regulated by the FSCS), you’ll be reimbursed.
Where this gets a little more complicated is if you have savings of over £85,000 spread between different savings accounts (including ISAs). Before opening another account, investigate whether the financial institution is part of a larger group that contains a bank or building society you already have a savings account with. If it is, you won’t receive protection on anything above £85,000 collectively.
For example, if you had £50,000 in a Lloyds savings account and £45,000 in a Scottish Widows Bank savings account, you’ll lose £10,000 if they went bust because both are part of the same group.
Yes, you can open a joint savings account. It may even be possible for more than two people to have one, for instance, if you live in a shared household and want to put money aside for bills.
It’s important to remember that all the account holders will have access to the savings though, so it’s vital that you trust each other, and money is only withdrawn when all parties agree to it.