Regular savings accounts explained
WIth a regular savings account you can put money away monthly and start to see your nest egg grow
If you’re looking to build up your savings pot gradually – then a regular savings account could be for you. A regular savings account can help you kickstart a savings habit and build up your savings. Although, we don’t offer regular savings accounts, we have a range of savings accounts you can compare with us. We can still help you find the right home for your savings by answering a few questions. We can also show you all the regular savings accounts on the market, but we may not be able to help you open them.
What is a regular savings account?
Regular savings accounts are a type of savings account where you’ll save money on a regular basis, typically monthly, for a fixed term, earning interest on the cash. This is why these accounts are sometimes known as ‘monthly savers’.
How do regular savings accounts work?
With a regular savings account you put an amount of money each month into the account. The payments usually range from between £10 and £500 - but there will usually be a maximum monthly amount, such as £250 per month or £500 per month.
You’ll be paid interest on your deposits. Regular saver accounts tend to have higher interest rates than instant or easy access savings accounts.
The account will usually run for a fixed period, typically a year at which point you’ll take your savings and interest earned.
During the fixed term, savers will not be able to access their money. If they do, they could face penalties. So, before opening a regular savings account, it is important to consider if you’ll be able to not dip into your savings for a year.
Regular savings accounts can also be subject to penalties. For example:
Missing payments: If you don’t make your regular payment, you could face the interest rate being reduced.
Early withdrawals: With regular savings accounts, the idea is that you leave money to grow in the savings pot over a fixed time. Early withdrawals can be subject to penalties such as a lower interest rate for that month or the remainder of the term. Your account may even be closed. It’s important to speak to your account provider about their exact policy for early withdrawals.
Is a regular saver account right for me?
If you’re at the start of your saving journey, then opening a regular savings account could be ideal for you. With a regular savings account, you’re drip-feeding a set amount of cash into your savings each month. By saving money on a regular basis, this could help you get into the habit of saving money and building a substantial savings pot.
Because regular savings accounts need you to put a set amount of money away, this savings account is best suited to you if you can afford to do this. If you’re unable to put money away every month, for example, then this may not be the best type of account for you, as you could face penalties such as a lower interest rate if you miss a monthly deposit.
With a regular savings account, you will essentially have no access to the money you’ve saved until the term is up. This means regular savings accounts are not ideal for emergency savings, because you’ll want to get your hands on your cash fast when you need it urgently. Maybe consider an Easy Access Savings account if you’re looking to access your savings whenever you need it.
A regular savings account’s fixed time frame can work to your benefit if you have a short-term savings goal. For example, if you’re saving for a wedding or a car.
What are the advantages of regular savings accounts?
There are a number of attractive features of regular savings account, including:
Attractive interest rates
One of the biggest benefits of regular savings accounts is the interest rates. The interest rates tend to be higher than those on a current account or easy access savings account.
Gets you saving
If you’re looking to get your finances in order, then regular savings accounts are a good place to begin. By putting money aside every month, you’re starting to save and getting into a saving routine. Small savings made each month can soon start to build up.
What are the disadvantages of regular savings accounts?
It’s important to consider the following downsides of these accounts, such as:
Being unable to access your money for up to 12 months, may not be suitable for everyone. If you do opt for an early withdrawal you’re likely to face penalties such as a lower interest rate.
Limitation on savings:
Regular savings accounts usually come with a limitation for how much you can save. For example, your regular savings account limit could be £3,000 (max £250 saved per month for one year). You might want to save more than this amount, especially when this money ideally shouldn’t be touched for a fixed period of time.
If you’re looking for an account with more generous limits, other savings accounts usually have maximum balances ranging from £20,000 to £1 million.
Regular savings accounts tend to come with a lot of rules; minimum and maximum deposit each month and being unable to access your funds. These rules can make regular savings accounts quite rigid and may not be the best fit for you if you need your finances to be flexible.
How do I choose the best regular savings accounts?
As a regular saving account can come with a lot of restrictions, it is vital to do your research before signing up.
You need to check the minimum and maximum amount you can pay in each month as well as whether the amount you choose has to be the same each month, or whether it can vary.
Also, look to see whether withdrawals can be made and whether you have to pay money in every month or can miss a month here and there.
What are my alternatives to regular savings accounts?
If regular savings accounts aren’t for you, there are other savings accounts that might work better for your finances.
Fixed rate bonds
Sometimes called ‘fixed term bonds’, fixed rate savings accounts or bonds offer you a fixed rate of interest rate over a set period of time, such as one year.
Easy access savings
If you’re looking for a more flexible option, then easy access savings could be right for you. With an easy access savings account, you can dip into your savings at short notice without penalties. This type of savings account also usually doesn’t need a large amount of money to open an account.
Compare 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.