Savings Account Types

Types of Savings Accounts

Putting some aside for a rainy day...

There are several types of savings accounts and when deciding which type is best for you it is important to consider a few things, such as whether you are a UK tax payer, how easily you want to be able to access your money, how likely you are to need to access your money, how long you are prepared to put your money away for, and so on.

Cash Isas

A cash Isa (Individual Savings Accounts) is a type of savings account that will let you to earn tax-free interest on your savings. Cash Isas have a limit on how much you can invest each year, so if you want to save more than the allowance you will need to use another type of savings account as well. Instant access cash Isas allow you to access your savings if you need to.

Instant or Easy Access Savings Accounts

Instant or easy access savings accounts will normally offer you a better rate of interest than a regular current account, but without restricting access to your money. This is the type of savings account to use if you want to be able to access your money easily in an emergency, for example if a household appliance breaks down unexpectedly and you need to be able to withdraw some of your savings quickly to replace it. Some accounts may offer instant access to your money, while others may take a few days to process any withdrawals, and there may be a limit to the number of withdrawals you can make per year.

Notice Savings Accounts

Notice savings accounts used to offer better rates of interest than instant or easy access savings accounts, but this isn’t always true nowadays. With a notice savings account you will need to give your provider prior notice if you want to make a withdrawal; this may be 30, 60 or 90 days notice, so this type of savings account is not ideal if you are likely to need to access your money in a crisis.

Regular Savings Accounts

This type of savings account can be used to save part of your monthly income each month, and is ideal for those starting to save. This type of savings account usually has higher interest rates, but does have restrictions on how much you can put in or withdraw each month, so is only ideal if you are able to commit to consistently saving a set amount each month.

Fixed-Term Bonds

Fixed-term bonds usually offer a higher rate of interest than other types of saving accounts, but your money will be tied up for the term of the bond, meaning that you won’t be able to access your savings in an emergency. This type of savings account usually requires a lump sum investment, and you will know in advance the rate of interest for the bond.

Index-Linked Accounts

With index-linked accounts your money will be tied up for the term of the account, but the interest rate will be variable in line with inflation. Again, this type of savings account usually requires a lump sum investment.