Types of Savings account
Instant Access Accounts
Instant Access Accounts or Easy Access Accounts as they are also known are the simplest form of savings account in the UK. You are able to access your money at any time without penalty, depending on whether you have set up an online savings account, telephone banking or an account that can only be accessed through a high street branch.
Some people think of instant access accounts as an ‘everyday savings account’. Easy to pay money in and easy to get money out, with a modest rate of interest.
Notice Savings Accounts are similar to Easy Access accounts but you have to give notice if you want to make a withdrawal, typically between 30 and 120 days. There may also be a restriction on how many withdrawals you can make in a year so do read the small print. For this more limited access, you are often rewarded with a higher interest rate but it does pay to shop around.
Fixed Rate Savings Accounts
Fixed rate savings accounts or fixed rate bonds as they are also known pay a higher rate of interest but your savings are tied in for a set period of time, typically one to five years. Some accounts pay a low rate over the term and give a large bonus at the end of the fixed period. As the rate is fixed, you know exactly how much interest you will earn over the term.
If you are sure you don’t need your savings for the agreed amount of time, fixed rate accounts can be a good way to boost your return. A word of warning though, if you do need to get your hands on your savings, you will be penalised and as a result could lose a substantial amount of interest so make sure you won’t be tempted to dip into the pot!
Regular Savings Accounts
Regular savings accounts usually pay a higher rate of interest in exchange for you contracting to pay a regular monthly amount into the account. This tends to be for 12 months but some accounts can offer longer terms. These types of accounts can help if you want to save money on a regular basis or are saving for something specific such as Christmas or perhaps a long awaited holiday. Your money is tied in so you won’t have access to it for a set period of time and you’ll be required to pay a minimum amount into the account of a monthly basis. The minimum amount varies depending on the account but should be between £10 and £25. You may be penalised if you miss a payment so make sure you can afford to save before committing yourself.
It’s a good idea to diarise your last payment into the account as once the agreed regular savings period has finished, your interest rate will change. At this point it may be worth moving your money to another more suitable account.
Child Savings Accounts
Most banks and building societies offer special accounts for children to save, often with enhanced rates over their standard range of savings accounts. Try not to get side tracked by some of the free gifts on offer as it’s the savings rate that is really important.
Make sure you complete the Inland Revenue Form R85 to benefit from tax free saving. Your bank or building society will provide you with this. As most children’s accounts require a parent to sign the application form, it’s most likely that you will need to visit your local branch in person.
Like your own savings account choices, there will be a range of fixed, instant access and regular savings accounts on offer. A regular savings account can be a great way to get your children saving. Hopefully they will then acquire the savings habit for life!