Type of saver determines type of saving account

UK personal savings accounts are seeing a rise in popularity as more people rein back on the use of their credit cards and also attempt to reduce their overall borrowings. Even though saving in general may currently be more popular there are many reasons why people put money aside.



The search for the best savings account for you begins with the reason why you are saving. There are many different types of saving accounts such as instant access, term deposits and even tax-efficient Individual Savings Accounts (ISAs). Ease, or otherwise, of access to deposited funds and interest rates tend to be the main drivers when it comes to choosing a saving account.



For example, if you have a certain amount of cash left every month after your bills and other living expenses are paid and you are looking to invest it without the need to make withdrawals, then chances are you will want the highest interest rate available. You may also be less concerned whether you can instantly withdraw funds without penalty and therefore are likely to be rewarded with a higher interest rate.



A regular savings account, where a fixed amount is paid into the account each month by standing order could be the best option. This type of account allows withdrawals but in many cases if none are made over a fixed period, typically a year, then a bonus interest payment is made. That gives an account holder peace of mind that they can withdraw cash if needed for an emergency, but also that they will be rewarded if they leave the money untouched.



However, if you have already accumulated a savings nest egg and are looking to maximise any return then a term deposit account could be the account for you. This type of savings account has a fixed term, typically from six months to three years, and generally requires a moderate initial investment of around £2000 upwards. It pays a fixed interest rate with higher rates being offered for longer deposits. Currently this type of account pays from around two per cent AER gross on shorter term deposits to around 4.25% for a three term deposit.



This type of account also gives you the option to take an interest payment monthly, or to roll the interest up annually to be reinvested in the account. The key features of this type of savings product is that neither withdrawals from, nor additional deposits to the account are allowed. So, if you are looking to save your money for up to three years without ever needing to make a withdrawal, nor wanting to add to the account this could be ideal for you.



As already mentioned there are many different savings accounts available in the UK depending upon your personal circumstances. Think about why you are saving and be realistic about whether you will need access to your funds and then you can begin to whittle down choices to identify which product will give you the best return from your investment.



Matthew Pressman writes for a digital marketing agency. This article has been commissioned by a client of said agency. This article is not designed to promote, but should be considered professional content.