Even though there’s a wide range of savings account available, this is both a blessing and a curse. Knowing which one to choose can be difficult, as there is no one-size-fits-all solution either.
But if you find the right savings option and open an account that meets your requirements, the earning potential can be huge. So, with this in mind, here is what to consider when searching for and opening a savings account.
Types of savings account
- ISA savings account – With this kind of account, you can deposit up to £15,000 each year and pay no tax on the interest. Interest rates vary on things like access and notice, so it is recommended to use an ISA calculator to discover the best deals.
- Easy-access savings account – You can withdraw money as and when you like without notice or penalty, but high interest rates can be difficult to find. These can be easily managed online, by phone or in branch too.
- Term savings account – If you’re happy and able to tie up your money for a few years, a term savings account can generate lots of interest. But you may lose this interest if you need to withdraw during the term.
- Notice savings account – Again, these are suitable for those who do not need to regularly dip into their account, as you’ll need to give your provider plenty of notice, typically 1 to 3 months, to withdraw.
- Regular savings account – These ask you to deposit a certain sum each month in return for a good rate of interest. But there are usually rules about minimum and maximum deposits.
- Access to money – If you want to open something like a fixed-rate account, be absolutely certain that you do not need to access your money at any point, as there will be certain limits and rules. While accounts with little access generate potentially higher returns, you won’t have much flexibility or freedom.
- Interest rates – Pay close attention to the Annual Equivalent Rate (AER) when looking at savings accounts. Some providers will give new savers higher interest rates with introductory offers or initial bonuses, but these may disappear after a certain period of time. The purpose of the AER is to create a level playing field when comparing options. An ISA calculator can also help you determine the difference between accounts.
- Small print – Carefully check the terms and conditions of your account before signing up. There could be restrictions on the number of times you can withdraw money or charges for transferring funds to another account, so make sure you look over the small print thoroughly.
With easier access, low risk savings accounts, you’ll have lots of control and freedom over depositing and withdrawing money. However, to get the best interest rates, you may need to give up certain privileges and be more open to risk. But at the end of the day, it is about searching for and opening a savings account that suits you.