How to Choose the Best Savings Account
If you are planning on starting to save, have money you want to save or already have savings, then it is a good idea to think hard about what you will do with the money. It is a good idea to put it into a savings account, both so that you cannot easily get to it, but also because it will normally earn more interest in there compared with a current account or not in a bank at all. Therefore, you should have a look at the different accounts in order to choose the one that you think will be the best for you. There are different things which might be important to you in a savings account.
The interest rate on the account will determine how much money you get paid for having your money in that account. These rates can vary a lot depending on the bank or building society that you put the money in as well the type of account that you choose. It is therefore important to compare them and see how they differ. It is important to note that the interest will not always be the same as well. Most savings accounts have a variable interest rate which means that they might change over time. This means that even if you find the account with the best rate, it could change at some point so you will need to keep a check out for that as you may then want to swap to a different account. Some accounts will have fixed rated of interest though. This can be better as you know what you are going to get, but it might have conditions attached to it, so you will have to think about whether you are happy with these.
One of the conditions that is common with a higher interest savings account is that you will need to give notice. This is something which can be okay in some circumstances but not in other. It can be handy to have some emergency money in an instant access account so that you know that you can get to it as soon as you need it. You will need to think about whether you will be able to manage if you tie up all of your money or how much of it you will need to leave to be able to access instantly. This is very much a personal choice, but having enough to cover a months worth of costs, could be a good idea.
Notice accounts vary a little bit. With some you will have to give a certain amount of days notice before you can make a withdrawal, perhaps 30 days or even longer. This will obviously vary depending on the account issuer. Some accounts you have to have your money in the account for a certain time period. This is the case with many fixed rate bonds, where you will get a reasonable interest rate but you will have to keep your money in the account for a year or a number of years. Of course, with this there is a risk that the interest rates might rise significantly and the rate you are being paid will remain at a low level, but the reverse is always true and if interest rates go down you will remain at the higher rate. You will need to have a think about whether you are prepared to take this risk. It may depend on what the current economic situation is.
You may also want to think about other factors too such as the reputation of the issuer, how easy it is to deposit and withdraw money using their systems and things like this. It is good to think about what factors will be the most important to you so you can compare them.