How do regular savings accounts work?
A regular savings account is a great way to start a savings habit, as you can put small amounts away each month and in return earn a competitive rate of interest.
Key takeaways
Regular savings accounts are for people who want to put away a fixed monthly sum, typically between £10 and £500
Money is usually locked away for a year and withdrawals aren’t allowed
Interest rates are often higher than those from standard savings accounts, but the amount of money you can put away is capped
Ideal for those who would like to start a regular savings habit, and don’t need instant access to the money
Regular savings accounts require a fixed monthly deposit ranging from £10 to £500. They are designed for a set term, usually of one to two years, and they usually pay a generous rate of interest.
However, the higher interest rates on offer are usually subject to a cap on the account balance.
What is a regular savings account?
A regular savings account is an account that lets you put money away each month. There are usually limits on how much you can deposit per month and you’ll earn interest on your savings.
You won’t be able to access the money during the term of the account, usually one or two years. Some accounts also require you to have a current account, from the same provider, to access the regular savings account.
How do regular savings accounts work?
Regular savings accounts include the following features:
Regular savings account features
Commitment to saving
These accounts typically require you to make a deposit every month
Better interest rates
They usually entice savers with interest rates that are higher than those of instant or fixed rate savings accounts
Fixed term
The accounts typically operate on a fixed term, after which savers can access their money and the interest earned
Limited access
Dipping into these funds early can lead to financial penalties
Missing payments
Skipping a monthly deposit can lower the interest rate
Early withdrawals
Taking out funds before the term ends can result in penalties or even the closure of the account
What interest rates can I get with a regular savings account?
You can currently get 6.00%
Is a regular savings account better than a fixed rate bond?
Returns on fixed rate bonds and regular savings accounts vary, but your main aim should e finding an account that pays the highest rate of interest, and one which suits your savings goals.
Here are some of the main differences between the two accounts:
Regular savings account | Fixed rate savings account | |
|---|---|---|
Interest | Paid at the end of the term | Can be paid monthly or annually |
Withdrawals | Not until the end of the term | Not until the end of the term |
Deposit amounts | Capped at a monthly sum | Higher sums allowed |
Length of account | Usually one or two years | Can lock money away for up to five years |
A fixed-bond may not offer such an appealing interest rate, but you'll be able to deposit a big lump sum from the start and won't have to remember to pay in money each month or set up a direct debit. Common accounts include:
The pros and cons of regular savings accounts:
Here are some advantages and disadvantages of a regular savings account:
Pros
High interest rates
A good way to form a savings habit
Ideal if you don’t have a big lump sum to put away
Cons
Limits on the amount of money you can put away
You can’t access the money until the end of the term without a penalty. If you feel you may need to get hold of your money for an emergency, you may want to consider an easy access savings account instead
You usually need to make a deposit every month
What are the alternatives to regular savings accounts?
For those seeking different savings accounts, alternatives include:
ISAs: Individual savings accounts (ISAs) offer a tax-efficient way to save up to £20,000 per tax year. They come in various forms, including stocks and shares ISAs and cash ISAs.
Easy access savings: If flexibility is key, then easy access savings might be the perfect fit. This type of account allows for penalty
-free withdrawals and they don’t require a large initial deposit.
Other useful guides
Looking for some further reading? Check out some of out other useful savings guides for more information:
Comparing savings accounts with MoneySuperMarket
Start saving with MoneySuperMarket today. Even though, we don’t offer regular savings accounts, you can still compare other savings products with us.
We have a wide range of easy access, fixed rate bonds and cash ISA deals to compare. We’ll show you the interest rates on offer and any terms, such as the minimum deposits.
Once you’ve made your selection you can quickly and easily click through direct to the provider to open your account – and get saving.
Frequently asked questions
Am I eligible for a regular savings account?
Unless you've got a poor credit rating or a low income, almost certainly. To be eligible to open a regular savings account you'll simply need to be aged 18 or over (sometimes you can qualify at 16), with the caveat that in most cases you'll have to hold a current account with the same bank.
In the event that you don't already have an account of some sort with the bank, you'll be required to provide a form of ID and show proof of your address.
Proof of your identity may also be required if you haven't opened an account of any sort for a long time.
What is the best regular savings account for over 60s?
There aren't any regular savings accounts designed specifically for over 60s. But there are plenty of standard regular savings accounts that offer attractive rates and are ideal if you're stashing money for a savings goal, such as a retirement party or that sunny getaway you've been promising yourself.
Is my money safe in a regular savings account?
As long as your total savings with the bank do not exceed £120,000, deposits stored in a regular savings account are fully covered by the Financial Services Compensation Scheme. That means they're not at risk if your bank runs into financial difficulties.
Will the bank conduct affordability checks on me for a regular savings account?
If you're already a current-account holder with the bank, you shouldn't have to pass an affordability check to open a regular savings account with them.
However, if you're not an existing customer, banks will generally look into your finances before approving you for a regular savings account. In the event you've got a poor credit rating or low income, you could be rejected.
Am I allowed to close my account early?
You can usually close your regular savings account early. But you can expect to face a penalty for doing so, most likely in the form of loss of interest.
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