Almost a quarter of people wish they had saved more over the last 18 months to help them deal with recent economic difficulties, according to National Savings and Investments (NS&I).
Perhaps that's why more of us are putting money away now - the AA has reported a 49% increase in the money held in its savings accounts.
But if you're new to saving money, there can be a bewildering array of options, from fixed rate bonds to cash ISAs. What are these different accounts good for and where are the top deals?
Easy access account
Many people prefer to keep their money in an easy access account, even though these tend to pay less than other, more restricted deals.
This is a good idea if you aren't saving for the long term and want to have access to your money whenever you like.
If you already have an easy access account, it's worth checking out what rate you're getting as some only pay a painful 0.10% or even less - not even matching base rate.
One top easy access account is the AA Internet Extra (Issue 2), paying 3.00% AER (annual equivalent rate). You can invest as little as £1 and there's no limit on the amount you can pay in or out.
However, 2.50% is a bonus for one year, so after 12 months you should look for a better rate and move your money.
If you know you won't need regular access to your money, you could find a better rate. For example, the Coventry Building Society 1st Class Postal (4) account pays 3.15%, but you can only manage it by post and the minimum investment is £1,000.
You can make four withdrawals a year - of a minimum of £1,000 - but any more and you'll lose 50 days' interest.
Regular saver
Maybe you want a disciplined account to help you get into the saving habit? To qualify for a regular saver account, you need to commit to making monthly deposits and accepting limited withdrawals.
However, these accounts do offer some of the best rates in the market, so if you can afford to make a deposit each month and don't need unlimited access to your money, it could be a good choice.
One option is Nottingham Building Society's Branch Fixed Rate Regular Saver - Issue 1. That pays 5.00% but no withdrawals are permitted in the first year and you can only deposit up to £100 a month.
Another good example is the Regular Saver Plus Issue 2 account from Stroud & Swindon Building Society. You pay in between £10 and £250 a month by standing order and earn a competitive AER of 4.50%. However, you can only make one withdrawal a year and you have to make a payment by standing order each month. Break these rules and you'll lose the great rate.
Fixed rate bond
Do you have a lump sum you need to put away for a while and can afford to lose access to?
With a fixed rate bond, you agree to leave your money untouched for a set period; you can't even pay in additional money.
In return, the bank or building society will usually offer a higher rate. The longer you agree to leave your money, the higher that rate will be.
For example, if you can afford to lose access to your cash for five years, you could earn a market-leading 5.10% with the AA 5 Year Fixed Rate Savings Account, which has a minimum deposit of £500.
Of course, there is a risk with these accounts. Over five years, the rate could become uncompetitive, especially if base rate or inflation increases. The longer you lock your money away for, the bigger the risk.
There are shorter-term accounts, though. ICICI Bank's HiSAVE Fixed Rate Account is fixed for three years and pays a decent 4.60%.
ICICI Bank offers a two-year fixed rate account, paying 4.25%. Both these accounts have a minimum deposit of £1,000.
Another option is Coventry Building Society's Fixed Rate Bond (118), which matures on August 31, 2012 and also pays 4.25%. The minimum deposit is £1, but this kind of account is better for lump sums.
Bear in mind that accounts like this are often limited issues, meaning once a certain amount has been invested by people, it will be withdrawn from the market. So, if you decide this is right for you and see a deal you want, it's best to move fast.
Cash ISA
Cash ISAs (individual savings accounts) are a great way to save because you don't have to pay tax on the returns, it's the government's way of encouraging you to save. You can stash £3,600 a year in this kind of account - £5,100 if you're over 50. From April, this rises to £5,100 a year for everyone.
Frustratingly, some of these accounts haven't been offering rates as high as non-ISA deals recently, but there are some good offers out there.
Cash ISAs can be easy access, fixed rate bonds or notice accounts - so you'll need to consider what restrictions you're happy with.
Santander has just launched a market-leading easy access offer with its Flexible ISA, paying 3.50% AER, guaranteed for a year. Keep in mind that after 12 months, you may need to transfer the cash into an account paying a better rate.
Read our review of the Santander Flexible ISA.
Stocks and shares ISA
If you're a bit more adventurous with your cash, you might prefer to invest your money in a stocks and shares ISA.
Like a cash ISA, this is a tax-free wrapper for your investments. You can read more about this kind of ISA in our article 'What you need to know about stocks and shares ISAs'.
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.
Rate This Article
Click on a star to rate this article.
