Finance > Savings
Types of Saving Accounts
There are five main types of saving accounts to consider. Whilst the interest rate is an important factor, the account you choose can also depend on how much you intend to save, the frequency of your deposits and withdrawal requirements.
In This Article
Instant Insights
- Easy Access – Access your cash whenever you want and earn interest whilst the money is in the account
- Notice Account – Potential to earn slightly more interest than an easy access account, but you must give notice before making any withdrawals
- Regular Saver – Designed for those who want to put money into savings each month instead of a lump sum
- Cash ISA – An individual savings account (ISA) that allows you to save without paying tax on interest earned
- Fixed-Rate Account – Lock your money away for a certain period of time, and in return, you get a fixed interest rate for the duration of the agreement
Types of Saving Accounts
- Easy Access
Easy access accounts allow you to withdraw money held within them whenever you want (some might take a couple of days to process). You’ll earn interest on the cash for the time it is stored in the account. Easy access accounts are ideal for emergency funds because your money is available upon demand.
The interest rates linked with easy access accounts are variable and usually relatively low. You may be able to find accounts with bonus rates, which boost the interest for a set period, however, you will likely return to low rates once the period ends. But hey, you can always switch following the bonus period.
- Notice Account
Notice savings accounts require you to give notice before making a withdrawal – notice periods can range between 1- 6 months. In return for giving notice, you often get access to higher interest rates than easy access accounts.
If you require your money sooner than the notice period agreed, you may be subject to a fine or reduction in interest earned. If in doubt, you can play it safe and opt for an easy access account.
- Regular Saver
Regular saver accounts are designed for those who want to put money into savings each month instead of a lump sum. In return, you’ll get a fixed interest rate, which is likely to be slightly higher than easy access or fixed-rate accounts. Having said this, there is usually a maximum deposit that caps your potential earnings.
In most cases, you will not be allowed to miss a monthly payment or make a withdrawal during your term.
- Cash ISA (Individual Savings Account)
Cash ISA is a savings account that enables you to earn interest tax-free.
Due to the personal savings allowance, most of us won’t pay tax on interest from savings anyway. However, if you exceed this allowance, a Cash ISA could save you a hefty tax on your returns.
- Fixed-Rate Account
Fixed-rate accounts require you to lock away your cash for a set period of time in return for an agreed interest rate for the duration (usually 1-5 years). Due to not accessing your savings during this period, you will likely receive a higher interest rate in return. Generally speaking, the longer the duration of the agreement, the higher interest you will receive.
Be careful not to deposit savings that you might need to access. Withdrawing early will incur a penalty – that’s if you’re allowed to withdraw at all!
Share This Article
In This Article
Related Articles
Emergency Fund Explained
An emergency fund is a pot of cash put aside for unexpected life events that hold a financial burden.
Individual Savings Account (ISA) Explained
An Individual Savings Account (ISA) allows you to save or invest money in a tax-efficient way – a big tick!
Types of ISA
There are four main types of ISA, all with different use cases and benefits.