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A savings account is a safe place to keep your money for future spending. There are many different types of savings accounts which are suitable for either long or short-term saving goals.
It’s important to know what you're saving for, so you can find the right savings account for you. Most savings accounts also offer a specific amount of interest, which helps savers to grow their money.
This interest varies depending on the account you choose and it's normally paid either monthly or annually. The interest rate could be fixed or variable, and this impacts how much money you can earn. Variable rates change depending on many factors, such as the Bank of England’s base rate. Recently, interest rates have been strong for savings, so it’s always worth comparing savings accounts to find the best deal.
Anyone over the age of 18 can open a savings account, but they need to be a UK resident with a fixed address. There are also savings accounts for children to help them develop their financial skills.
Most savings accounts can be opened in branch, online or via the post and there is normally a simple sign-up process.
Here are some of the main types of saving accounts to consider:
Easy or instant access accounts: This is a flexible savings account because it normally allows you to deposit and withdraw money at any time.
Notice savings account: This account typically has a higher interest rate than an easy or instant access, but savers need to give notice to withdraw money. This can vary from seven to 200 days.
Fixed-term bond: If you're happy to lock away your money for a specific period of time, then a fixed-term savings account usually rewards you with a competitive interest rate. Fixed-term accounts can range from 6 months to 5 years.
Regular savings account: For anyone that's happy to save little and often, a regular savings account requires a specific deposit each month. This is ideal if you don’t have a lump sum to put into your savings.
ISA: This is an individual savings account that allows you to earn interest tax-free.
Remember, these have different withdrawal limits, interest and initial deposits.
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As with any financial product, your personal circumstances dictate the savings account that's best for you.
The good news is there are plenty of options when it comes to savings - you just need to decide your priorities for saving. For example, here are some common scenarios of when someone might open a savings account:
A rainy day fund is always a good idea, as having some extra money put away for emergencies can give you peace of mind if an unexpected bill arrives. An instant or easy access account usually works well for this type of saving, as withdrawals and deposits are normally flexible.
Buying a car is a major purchase that probably doesn't happen overnight. A notice savings account could work well for this as you know roughly when the money is needed, so you can then give the appropriate notice.
Saving for a house deposit is a big savings goal that typically takes years to achieve. If you’ve saved a lump sum but you're not ready to move house, then a fixed-rate account could be ideal. You can lock away the money for a specified term and maximise the interest.
Starting a savings habit is something we should all consider, but it can feel like a mountain to climb. A regular savings account could be a good way to kickstart the habit as you deposit money little and often into an account.
Yes, most savings accounts are protected by the FSCS.
This is a free scheme from the government and it covers up to £85,000 in a registered bank or building society. This means if your chosen provider goes bust, your money is protected.
If you have more money than this, you may want to consider splitting the money into different savings accounts to make sure you're fully protected.
In terms of opening a savings account, you normally have a choice of doing this either online, in branch or by post. Then you usually fill in an application form and provide proof of identity, including your name, age and address.
This depends on the type of account you choose to open and how much you can physically save. Some accounts can be opened with as little as £1 and others have a limit of up to £250,000. It’s important to check the terms and conditions to see what limits the account holds.
You should start earning interest on the money you deposit as soon as you open your account. You earn interest every day and your bank should pay this into your account either monthly or annually depending on the account. Remember to check the terms and conditions of the account so you know what you are signing up for.
The minimum balance for a savings account varies, but there are accounts that allow a minimum deposit of £1.
Yes, you can get a joint savings account. You can open a joint savings account with a partner, friend or family member and this option is normally available during the application process.
The best savings account depends on your personal circumstances and how much money you would like to save. It’s important to consider the interest rate, but also take into account the terms of each product. These normally impact how much you can save and when you can withdraw money.
