There are hundreds of savings accounts on the market now, catering for all sorts of savers. Before opening up a savings account you need to know the reason for putting the amount aside- whether it’s for a holiday, further studies, marriage, emergencies or simply for a rainy day. Once you’ve decided what your plans are your next job is to decide how much access you need to your money. Are you saving for a long-term project, such as a dream holiday in a year or two, or are you trying to build up an emergency fund? In addition to looking at the interest rates on savings accounts you also need to look at other factors such as minimum and maximum deposits, penalties for making withdrawals, and any notice periods that may be required in order to make a withdrawal.
If you might need to dip into it at short notice, go for an instant access account, but if you can tie your money up for a while you may be able to get a higher rate by going for a fixed-term account or a notice account.
If funds allow, you might actually opt for two accounts Ã± one for long-term saving, building up a nest egg so that you donÃt have to rely on borrowing for big purchases Ã± and another for your rainy day money. While you want to get the best interest rate possible, there is no point tying yourself in to an inflexible savings scheme and being forced to borrow at a higher rate to do essential repairs or pay unexpected bills.
At present, there are a number of banks and building societies where you can park your funds, but they will all not bring you good returns. Some of them do pay a bonus if you don’t make a withdrawal for a certain period, but if you do so, your interest rate is affected. There are others who specify a minimum amount that you need to keep in the account for it to remain alive.
If you already have a savings account that does not pay a very competitive interest rate then you should consider making a switch to a different savings account where your savings can earn more in the way of interest. The difference in the amount that you earn in interest can be staggering in some cases with accounts that have larger deposits.
Savings are very precious and should be nutured accordingly. Whether you are looking to invest a lump sum or saving regularly most banks and building societies have an option to suit your needs.
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