As with many in the world of personal finance, saving has been completely transformed over the past decade, with falling interest rates and technological innovation, meaning the way we store our money must now be taken into account more. The good news is that the options for storing and growing your money are more plentiful than ever. The bad news is that it can be hard to decide which direction to go.
Before we look at specific accounts, let’s think about the different types of savings, because not all savings require the same type of account, and only by giving your savings a purpose and purpose can you determine which account is best for you. So before you read on, write down what you want to save for and when you’ll need the money.
Short-term or emergency savings
For short-term savings, like money you’re setting aside for a new couch, or something like an emergency fund that by definition requires instant access, you’ll probably want to use an account where you can withdraw funds immediately.
For quick withdrawals, the maximum interest rate you will be able to earn at the time of writing is 0.7% with Cynergy Bank or savings account from Chip’s Allica Bank Account app. That might not seem like much, but given that many high street savings accounts have lowered their interest rates to 0.01%, this might be a much better option and will give you a bit of a return on those savings – especially an emergency fund, which can remain intact for some time and contain a fairly large sum of money.
Although the Bank of England’s base rate – on which banks and lenders base their own interest rates for saving and borrowing – is at a very low percentage, it is possible to earn a little more interest – even up to 3% in some cases. case. This usually involves one or two things – depositing at regular intervals (usually monthly) and leaving the money untouched for a set period of time.
These may also have a cap on how much of your principal (your saved money) you can earn interest on. For example, NatWest’s Digital Regular saver pays 3.04% on balances up to £1,000, with a maximum monthly deposit of £50 – you can withdraw at any time, but to get the maximum interest payment , you may need to keep paying. the maximum of £50 on the account for 20 months. It’s a good option for savings that you don’t want to invest, but won’t need for at least one to two years.
Savings and long-term investments
For the savings you’ll be leaving for at least three to five years, a stock and equity ISA — where your money is invested in the stock market rather than sitting in your account — might be a good option to fight inflation ( currently on the raise) and make sure your savings don’t lose value.