Everyone should start their savings journey on the right path, making the ride to your ultimate financial goal as smooth as possible, enjoyable even! But, there are so many different savings accounts to choose from and potential catches to watch out for, so how do you choose the best account for your money and your needs?
Where to save?
Although a savings account is one of the simplest financial products, there is still more than just interest rates to think about. You’ll also need to consider and evaluate the different ways that accounts work and examine your personal circumstances before choosing and opening one. Here are a few things to consider…
Interest Rates: Some savings accounts will offer higher interest rates for an initial period which can then drop. Others have fixed rates or rates that go up depending on the amount deposited.
Tax: The Government encourages us to save by giving certain tax-free incentives to do so. This is currently being done through Individual Savings Accounts (ISAs). Make sure you take full advantage of such options and do not end up paying unnecessary tax.
Most savings accounts automatically have tax taken off the interest when you receive it. If you aren’t a UK taxpayer you can speak to your bank or building society to stop this happening.
Notice Periods: Some accounts require you to give a certain notice period for withdrawal of funds. These typically range from 30-90 days.
Time Period: Certain accounts will require you to leave your savings in the account for a specified period in order to reap higher interest rates.
How Interest is Paid: Different savings accounts will pay interest different – this is likely to be either paid monthly or annually.
Minimum Deposits: You may be required to make a specified minimum deposit, and possibly a certain number of deposits in any given period.
Additional bonuses: Some accounts will offer certain bonuses either to open the account, or if you satisfy some criteria – this is usually an advertising ploy to make the interest rates stand out! Therefore it is important that you read the small print – and be ready to switch your money when the bonus period comes to an end.
This is explained in more detail in Saving.