What savings accounts should I have?
From easy access accounts where you can take your money out at any point to fixed rate savings accounts where your cash is locked away, there are lots of savings accounts to choose from. Here we look at how to pick the right account for your savings goals.
Key takeaways
Some savings accounts offer bonus interest rates - always make a note of when this will drop
If you need to access your money quickly – you need it in an easy access account
Most UK savers won’t pay tax on interest due to the personal savings allowance
Up to £85,000 in any one account is protected by the Financial Services Compensation Scheme
What to consider before opening a savings account
Before you open a new savings account, it’s important to think about why you need one, how much money you’ll put away, and when you might need to access the case. Here are a few other key considerations to think about:
Always try and find the highest interest rate possible and if there is a bonus rate on an account, make a note of how long this will be in place for. If the rate drops, it’s time to switch your money into an account with a higher return. Also make a note of whether interest is paid monthly or annually.
How quickly can you get your hands on your money? For emergency funds, such as money to pay for a broken boiler of a car that’s failed its MOT, accessibility is king. However, if you're willing to lock your money away, you will usually be able to find a higher interest rate.
Keep an eye out for any caveats, including minimum deposits or mandatory monthly savings, and be mindful of potential penalties for withdrawals. Look out for any charges for making withdrawals, which could impact your savings.
Thanks to the personal savings allowance (PSA), most UK savers won't pay tax on interest. For those with heftier savings, a cash ISA provides a tax-free haven up to £20,000 annually.
For those building up large deposits, don’t stash more than £85,000 in any one account – the amount that is guaranteed by the Financial Services Compensation Scheme (FSCS). If your total savings are higher, consider spreading them between more than one account.
What to consider before opening a savings account
Interest rate
Access to cash
Terms and conditions
Paying tax
Protection
Types of savings accounts
There are lots of savings accounts to choose from, and most people have money in a few different types of account. Here are the most common types available:
With a regular saver account, you commit to saving a minimum amount each month for a set period, which is usually 12 months. It's an excellent way to start a savings habit, often with attractive interest rates. However, you may not be able to deposit a large lump sum, and there might be restrictions on withdrawals.
An easy access savings account works a little bit like a current account, allowing you to withdraw your money whenever you need it. Interest rates are usually lower than accounts that require you to lock your money away, but many still beat the rate of inflation.
A fixed rate account locks your money away for a set period, such as one, two, or give years. These tend to pay the highest rates of interest but there are usually penalties if you want to withdraw your money early.
A notice savings account requires you to give advance notice before withdrawals, potentially rewarding you with higher interest for your patience.
These accounts promise a higher rate of interest, but watch out for conditions like substantial minimum deposits.
Children’s savings accounts are for children, aged under 18. There are lots to choose from and children usually won’t pay tax on any interest earned.
A cash ISA offers tax-free savings, but be aware that the returns might not match those from a stocks and shares ISA.
You can deposit £9,000 per year into a Junior ISA but the money can’t be access until a child turns 18. At that point it also becomes theirs, and they can withdraw the money.
The Lifetime ISA is tailored for first-time homebuyers or retirement savers, complete with government bonuses and a £4,000 yearly cap.
Types of savings accounts
Regular savings accounts
Easy access savings accounts
Fixed rate bonds
Notice savings accounts
High interest savings accounts
Children’s savings accounts
Cash ISAs
Junior ISA
Lifetime ISAs
How to find the best savings account
The "best" savings account is subjective, and it all depends on your financial situation and savings goals. Our helpful graphic below can guide you in making an informed decision:
How much should I put away each month?
Wondering how much to save each month? Our savings calculator can give you an idea of how much you should be putting away to meet your savings goals. Plus, demystify interest rates with our guide to how your returns are calculated.
Other useful guides
If you want to know more about savings, we have a range of guides to get you up to speed:
Comparing Savings Accounts with MoneySuperMarket
Finding and opening a new savings account doesn't have to be daunting. MoneySuperMarket takes the hard work out of comparing accounts by features such as access, rate, and ISAs. Check out our comprehensive savings account comparison tool to streamline your search.
Once you've made your choice, you'll be directed to the provider, which will help you through the rest of the process, and you can usually open your account within minutes.
