Why compare savings accounts?
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 on savings accounts have risen substantially after years in the doldrums, so it’s a great time to take advantage by moving your money to a new account.
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.
Types of savings accounts
Choose from the following options to find the right fit for your finances:
Easy-access savings accounts
If you want flexibility, this could be the right choice for you. You can deposit and withdraw money easily, which makes easy access accounts a good option for building up an emergency fund.
However, being able to access your money easily comes at a price; rates on easy access accounts tend to be lower than with other forms of savings account.
Notice savings accounts
With a notice 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 210 days.
In return for giving up easy access to your money these accounts tend to pay a slightly higher rate of interest.
Fixed-rate savings accounts
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.
An ISA allows you to save up to £20,000 per financial year (6 April – 6 April) without paying any tax on the interest earned.
You can choose between cash ISAs and stocks and shares ISAs, but you can only open and pay into one account each year. If you’re opting for a cash ISA then you can choose between easy access and fixed-rate terms.
Regular savings accounts
If you want to save a small amount on a regular basis, a regular savings 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.
Child savings accounts
There are various options if you want to open a savings account for your child, including Junior ISAs which again offer tax-free returns. With Junior ISAs you can keep the money in cash or invest in stocks and shares.
Sharia savings accounts
These are savings accounts that comply with Sharia law. They do not charge or pay interest as this is forbidden in Islamic law. Instead these accounts offer an ‘expected profit rate’.
How to choose the best savings account for me
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 the right option.
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.
How do I get higher interest on my savings?
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 usually have a better interest rate than shorter fixed-rate period accounts.
Shopping around is crucial though, since different savings providers will offer different rates on their accounts. Use our comparison service to compare 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, unless the money is saved within an ISA.
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, however. You may want to switch when this happens.
What is the best savings interest rate?
On 7 September 2023 the best savings rate available through Go.Compare for an easy access account is 4.84% from Chip, while if you lock your money away in a three-year fixed rate you can get 6.08% from MyCommunity Bank.
How many savings accounts can I have?
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.
What do you need to open a savings account?
You’ll need to fulfil the eligibility criteria and will need to provide details such as your age and address
Proof of identity
Your driving licence or passport may be required, as well as proof of your address and bank account
Choose your account
Decide which type of savings account you want to open based on your financial needs
Your initial deposit
You may be required to deposit a certain amount to open the savings account
Your regular deposit
Some accounts require you to pay in at least a minimum amount each month (some also have maximum amounts)
How much should I save?
There’s no ideal amount to save; it all comes down to what you can afford. It’s generally recommended that you have the equivalent of around three months’ salary in savings that you can turn to in an emergency, but building that savings pot means setting aside an amount each month that won’t cause you 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.
Frequently asked questions
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, it’s important to have money available to you if you need it.
If you’re determined to get the best possible return from the money you set aside each month then you may want to consider investing. However, while investing can deliver bigger returns there is also the risk of losing money, which won’t happen with a traditional savings account.
ISAs are simply types of savings accounts, but they do come with additional rules to be aware of.
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, whereas other types of savings account may not have a limit.
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.
It’s important to check that the savings provider is covered by the Financial Services Compensation Scheme. If so, the first £85,000 you save is protected in the event that the provider goes bust.
This will vary based on the type of account. Some savings accounts pay interest on a monthly basis, while others pay it annually. The right account for you will depend on how frequently you want to receive those interest payments.
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.