Easy Guide On Savings Account

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Whether you're looking to buy a dream item, start a business, pay for your children's future education or simply have money for a rainy day, putting aside a nest egg is always a good idea. When it comes to savings, there are a number of options available to maximise the cash you manage to squirrel away.

The type of savings account you choose will depend on your individual needs and lifestyle - such as how quickly you'll need access to your funds, how long you intend to save and whether you want to pay tax. The following article will outline the various choices available to you by explaining the main types of savings accounts.

Regular Savings Accounts

If your circumstances allow you to save a regular amount of money each month, this type of account is designed for you. Be aware that many banks tend to only offer attractive regular savings accounts as a loyalty incentive to customers who have a current account with them. That being said, these accounts can pay very high rates, although be sure to read the fine print as they often have conditions attached to them which if breached lead to a loss of interest.

Regular ...
... savings accounts can be opened with as little as £5 a month and vary according to the provider. Some pay out an annual bonus on top of their interest rate if you keep up the required deposits, while some simply offer impressive basic savings rates but limit the amount you can put in each month.

Most of these types of accounts limit the number of withdrawals you can make annually, so while they won't be highly suitable as an emergency cash resource, they're an excellent way of getting into the habit of saving.

Instant Access Savings Accounts

These accounts are a good choice if your savings are aimed at being an emergency fund for unforeseen expenses. Some even provide a cash machine card so you can access your money 24/7 without any fuss, although your will generally have a limit on how much you can withdraw.

Traditionally, the most popular instant access accounts are with internet-only banks, where you will access your savings by transferring them to a chosen current account. Normally, the ideal account of this type will pay the most interest, but be aware that while some high-interest telephone and internet-based accounts claim to offer instant access, the reality is you often need to wait a few days while a cheque is sent out or a transfer is made to your current account if you want to withdraw all your cash.

Notice Accounts

Bank will generally offer a better rate of interest if you agree to lock your savings up for a period of time. The downside however is that you will not be able to access your funds quickly - with these types of accounts you'll need to give notice of your intention to withdraw money before it can be released. A 90-day notice account for example will necessitate you having to wait three months before your cash is in hand. While you can often request an earlier release, you will pay a penalty fee for this.

It must be said that these days instant access accounts offer interest rates that are just as good (if not better) than notice accounts, plus they allow you to access your money faster.

Cash Individual Savings Accounts (Isas)

Cash Isas are savings accounts that allow you to earn tax-free interest on your money. These have limits however on how much you can deposit each tax year. Although cash Isas don't always offer the highest rates of interest compared to other savings accounts, when you include the tax you'd pay on ordinary savings accounts they often come out top.

National Savings Accounts

The National Savings Department, government run, provides a variety of accounts and bonds to choose from. Some pay tax-free returns, some pay interest without tax but require you to declare it on your tax returns and others like fixed rate savings bonds deduct 20% tax (which cannot be reclaimed) before they pay out your interest.

While National Savings might not offer the highest rates on the market, they are reputable as been one of the safest places to keep your money because all their products are capital secure, meaning you're guaranteed to get your money back regardless of economic changes.

Conclusion

Choosing the most suitable savings account for your needs will depend on a combination of doing your research to compare all available options currently on the marketplace and being clear on how you want to use the money you save.
Sean Raston is an economics student and savings account expert.