Deciding which type of savings account is best to use here in the UK is not easy. There’s such a wide range of savings vehicles to choose from.
To help you to form an opinion of which type of savings account would suit you best, we have outlined the various types available below, with a brief explanation of each.
The Cash ISA
Opening up a Cash ISA will allow you to invest up to £20,000 per annum.
Any interest your account accrues will be exempt from tax. In terms of what you invest in, you can choose cash ISAs, stock and shares ISAs, or you can open both.
Bear in mind that with stocks and share ISAs, investments can go down, as well as up.
Cash ISAs offer easy access to your savings, but to earn a better rate of interest, you can opt for a longer term fixed rate ISA.
Find out more about the various types of ISA in our guide.
Ordinary, Easy-Access Savings Accounts
This type of savings account is very basic.
Branded savings accounts do not earn great rates, but they do allow you to withdraw money easily and rapidly, mostly without financial penalty.
Some accounts offer plastic cards for ATM use. Many people use this type of savings vehicle for their “emergency savings”, because of the easy access.
The Notice-Savings Account
A notice savings account works differently to ordinary, easy-access savings accounts. As the name suggests, you have to give notice prior to making a withdrawal.
Notice periods vary anywhere from 30 to 90 days, hence are not used by people who require emergency access to their savings. If you are forced to withdraw, you will incur a penalty.
Because of the notice period, these accounts usually offer better interest rates than instant access accounts, but not always; so do your research well.
The Regular Savings Account
These types of savings accounts require you to invest money every month. They are ideal for people who have disposable income and who are well-disciplined.
They sometimes limit the number of times you can withdraw money over a 12-month period. Some also have restrictions on the amount you can deposit at any one time.
Find out more about regular savings accounts.
Fixed-Rate Bonds Savings Platforms
Fixed-rate bonds savings accounts provide fixed rates of interest over a specific period of time.
Fixed rate savings accounts offer higher interest rates than instant access, notice access or regular savings accounts but they do lock your money away for the duration of the set interest rate period.
The durations vary anywhere from one to five years. If you do withdraw money in the interim, you can pay a significant penalty.
New for 2018: The new Help to Save Account
When launched in 2018, this account will offer workers on low pay a £1,200 bonus from the government.
Workers who get working tax credit or universal credit can save up to £50 per month and get a 50% bonus after 24 months.
Help to Save accounts will be available through NS&I to those who qualify. It is designed to support those on low incomes and to help build up their savings.