Use these tips to narrow down your search for a savings account – read ‘Next steps’ and then get saving!
- Tip 1 – Set a savings goal
- Tip 2 – Know yourself when comparing rates
- Tip 3 – Use regular savings accounts or fixed term deposits
- Tip 4 – Be tax-wise
- Tip 5 – Don’t keep more than £85,000 with one banking group
Tip 1 – Set a savings goal
You can use different accounts for different goals. For example, use an instant access account to save for an emergency fund while using a fixed-rate account to save up for a deposit on a house
What do you want to get from your savings? How much do you need to save? When do you need the money?
You might want to save a set amount by a target date or save up for a specific thing like a special day out or a new car.
Your savings goal will help determine which account is best for you. If you have more than one goal you could use different accounts for each one.
Tip 2 – Know yourself when comparing rates
How hands on are you likely to be with your savings? Some accounts offer a high bonus rate which is designed to tempt you in – but bonuses drop off after a certain period.
If you have time to shop around and don’t mind switching to get the best deals, set a reminder to switch at the end of any initial bonus rate.
If you don’t have time to keep switching, avoid accounts offering bonus rates and look for a rate that’s been more stable historically.
Comparison websites are a good starting point for anyone trying to find a savings account tailored to their needs.
We recommend the following websites for comparing savings accounts:
- Comparison websites won’t all give you the same results, so make sure you use more than one site before making a decision.
- It is also important to do some research into the type of product and features you need before making a purchase or changing supplier.
- Find out more in our guide to comparison sites.
Tip 3 – Use regular savings accounts or fixed term deposits
Beware of structured products that look like cash bonds offering a high interest rate, these are risky investments and not suitable for cash savings.
Can you set up a standing order to your savings account or tie up your money for a year or more?
If so, you could earn a bit more interest with a regular savings account or a fixed-term deposit or savings bond.
But remember, with a fixed term account you might not be able to access your money immediately (or even not until the end of the term) – and there could be a hefty withdrawal fee.
Tip 4 – Be tax-wise
Do you pay income tax?
If not, ask to have your account interest paid gross – otherwise tax will be automatically deducted.
If you are a tax payer you can earn interest tax-free in a cash ISA.
But be sure you’re getting a good interest rate so the tax benefit isn’t cancelled out by lower returns.
Tip 5 – Don’t keep more than £85,000 with one banking group
Cash you put into UK banks or building societies (that are authorised by the Prudential Regulation Authority) is protected by the Financial Services Compensation Scheme (FSCS).
The FSCS savings protection limit is £85,000 (or £170,000 for joint accounts) per authorised firm.
It is worth noting that some banking brands are part of the same authorised firm.
If you have more than the limit within the same bank, or authorised firm, it’s a good idea to move the excess to make sure your money is protected.
Choose from the links below for more info and to get saving!
- How to set a savings goal
- ISAs and other tax efficient ways to save or invest
- Compensation if your bank or building society goes bust
This article is provided by the Money Advice Service.