The best savings accounts

By Charlotte Yau
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From ISAs to easy access and notice accounts, we'll help you find the account you need.

Don’t you wish you had taken advantage of the days when ‘saving money sensibly’ just meant putting the odd £1 coin into a piggy bank and not the corner shop? You’re not alone.

Once adulthood hits and saving money become a necessity, it’s far from straightforward to decide where to put your money.

There are so many types of savings accounts, and so many different companies to trust your money with, but this guide looks to make that all a bit easier. We’ll break down the different savings accounts out there before flagging up what might make this the right one for you, and let you know of any red flags too.

The different types of savings accounts

Savings accounts are designed to help you save money over a long period of time. There are different types of savings accounts, but you will usually be paid interest monthly or yearly on the money that you save, slowly increasing your overall amount.

This is known as your capital. Although this is clearly an incentive to save money, this interest may be taxed. How much you will be taxed, however, depends on which savings account you choose. You can choose from the following:

Easy Access Accounts

Access is easy and whenever you want, but in exchange for this flexibility you’ll likely be dealing with lower interest rates on the money while it is in the account.

Fixed Rate Bond Accounts

With fixed rate bond accounts, you agree an interest rate in exchange for your agreement that you won’t make any withdrawals for a set amount of time. The interest rate, which is often higher than with easy access accounts, is better if you agree to a bond of longer than two years. However, you will pay a penalty if you do withdraw from your savings before the agreed time is up.

Cash ISAs

This account gives you the option to save money without paying any tax on the interest that your savings earn. There is no charge to open one and all major bank or building societies offer cash ISAs. The minimum deposit can be £1 and there are no management or administrative costs.

Fixed Rate Cash ISAs

Fixed rate cash ISA's offer fixed interest rates, so they will pay a guaranteed amount of interest for a set time. This means you’ll know exactly what you’ll make on your savings. Their interest rates are fixed and generally higher, though they lock your money away for a certain period (generally between one and five years).

The advantage of this ISA is that you can earn more interest, but just as with fixed rate bond accounts, you will be hit with a penalty if you withdraw during the agreed time.

Help to Buy ISAs

This relatively new type of savings account is great if you’re saving for a new home and have a reasonable amount of savings to put away each month. You can put up to £200 into the account each month and these savings are tax-free. Not only that, but the Government top up your savings by 25% when you come to buy your home.

This applies to the first £12,000 of savings, so will give you a maximum of £3,000. However, if you withdraw money from the account, it no longer counts towards your potential bonus.

Notice Accounts

Notice accounts are a sort of happy middle. You usually get a higher interest rate than with an easy access account, but you don’t have to wait years to withdraw your money. Instead, you have to give 120 days ‘notice’ that you want to withdraw money – hence the name.
 

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