Our own research shows that this is because many people are struggling financially and find it hard to make ends meet, let alone put some cash aside.
That's why an account that demands some discipline couldn’t come in handy.
What is a regular saver account?
A regular savings account is great for those looking to get into the habit of putting some money away each month, so here’s a closer look at what the products.
Regular savings accounts can offer higher rates of interest than those available on easy access accounts or fixed rate bonds. But, they do tend to be more restrictive so it’s important to understand exactly how they work.
On the plus side, as well as offering attractive rates of interest – which is usually fixed for 12 months - many allow you to save as little as £10 a month. This is why this type of account is popular with first time savers. Regular savings accounts are also good if you are saving for a specific purpose such as a holiday, wedding or Christmas.
These are great features, but as you may suspect, there is a catch.
Are there any disadvantages?
While these accounts are suitable for a wide range of people There are things you need to know.
There are generally restrictions on the way you operate the account, and the terms and conditions may be a bit too tough for some savers.
While the minimum amount you can pay into regular savings accounts tends to be low, the maximum is also fairly low. It tends to be capped at around £250 a month, although some products will allow you to deposit a higher amount. However, it is because providers limit the amount you can pay in that enables them to offer a rate of interest that is so much higher than those available on other types of cash savings account.
Most regular savings accounts require to keep paying money in every month during the fixed term, and some products don’t allow the flexibility of reducing or increasing your payments.
Also, you can’t usually access your money during the term. Although Some accounts will allow one or two penalty free withdrawals.
The total interest, you get back may not be as high as you might expect. Each deposit that goes by will earn slightly less interest than the month before, due to the way it’s calculated – the last month’s deposit will earn just one-twelfth of the total interest percentage.
After 12 months, you can access your cash – its worth doing so as quick as possible because its usually moved into a default account thats paying a much less competitive rate so you want to switch that money over to a better deal as soon as you can.
Who do regular savings accounts suit?
Regular savings accounts are great for first time savers and those looking to save for a specific purpose. However, the fact they tend to offer higher rates of interest than those on easy access accounts and fixed rate bonds means they’re also popular with seasoned savers looking to earn a bit more on some of their money.
But these accounts aren’t for everyone. If you’ve got a lump sum you want to invest then a regular saver wouldn’t be appropriate because the amount you can pay in each month is capped , you would be better off looking at a fixed rate bond (that’s assuming you can afford to lock your money away for a few years).
Also, regular savers aren’t suitable if you’re looking for somewhere to stash your rainy day fund, or if you think you may need to access your cash – if that is what you are after then an easy access account is probably for the best.