In today’s world of economic uncertainty it is more important now to save than ever before. After the 2008 recession, hundreds of thousands of people were laid off and left in a very difficult financial situation not helped by the fact that the national attitude towards saving has been relaxed in recent years, meaning that very few people had money tucked away for such emergencies.
However this slack attitude is changing in Britain as more and more people are acknowledging the importance of hoarding their money to protect themselves and their families in the future. Putting money into a savings account is a popular method of saving, especially if you are not interested in investing money in uncertain vehicles like stocks and shares.
Savings accounts can be used for any and everything, putting money away for; your children’s future, a new holiday or car, your dream house and so on. There are currently a vast number of savings accounts available in the UK from high-street banks, building societies, the post office and online providers.
Before You Start
Before you even think about looking into savings accounts you should ask yourself ‘do I have any debts?’ If your answer is ‘yes’, then there is little point funding a savings account. The main reason is due to the interest accumulated on debts being a lot higher on average than the interest gained on savings accounts, therefore choosing to open a savings account without paying off your debts will most likely mean that all the interest generated will then have to be spent on repaying your debts interest.
Of course conventional debts like mortgages and credit cards are generally exceptions to this rule- but always check this factor later when you are researching savings accounts.
Types Of Savings Account
Generally, there a two saving account types currently available to suit different people with different financial needs.
Fixed-Rate or High-Interest
High-interest savings accounts are for the purpose of saving/earning large sums of money. The accounts are intended for people who have several sources of income or have savings elsewhere as they are like a contract; once invested you will not be able to take the money out until the fixed-term ends- these accounts offer high interest to compensate this obligation.
Quite self-explanatory, these accounts let you have quick and easy access to your savings. Some providers will let you make instant withdrawals immediately, whereas others (especially online accounts) may take up to a few days. Most providers will not charge owners for withdrawing money but they may place a cap on how many withdrawals you can make.
This type of savings account is ideal for those who wish to save money but perhaps do not have other finances elsewhere so may wish to take back some of the money invested if necessary. Easy-Access accounts are not the best way to generate a lot of money as their interest rates are often fairly low due to the instant-access nature of them.
All savings accounts have stipulations about their use (how many deposits/withdrawals you’re allowed, how much money can be invested/withdrawn, tax regulations) so read very carefully through the ‘terms of service’ or ‘terms and conditions’ before you open a savings account.
Government-owned websites such as Direct.gov.uk and HMRC.gov.uk are a great resource for finding impartial and official information, answering an abundance of questions regarding legality and statistics about savings accounts.