So you are saving for a home, car or maybe you just like hugging your money and never spending it, either way you should know what types of saving accounts are out there.
Regular savings accounts:
Regular saving accounts usually commit you to making a minimum fixed payment (£25- £500) per month for a minimum term which is usually 12 months.Due to this regular savings accounts usually offer high interest rates of over 3% in comparison to other saving accounts. Regular savings accounts can be very strict and will typically penalise you if you don't keep up your minimum monthly requirement. This means if you need access to quick emergency money, you will be personalised for this. Due to the fact that regular saving accounts are treated as monthly commitments, they may affect your eligibility for credit as the lender might take this into account.
Fixed rate bonds:
Fixed rate bonds are savings accounts where you deposit a lump sum of money for a fixed term(6 months-5 years). You will have no access to the money and will be paid a rate of interest per year. At the end of the term you will then receive your initial capital. Some fixed rate bonds have an interest rate which goes up in line with the amount of money you deposit and the generally the longer the term the better the interest rate. Fixed rates bonds are good because they give you certainty on the amount of interest you will earn and also a guarantee that you will earn that amount regardless of failing interest rates. Fixed rates are great but you could face a loss if interest rates rise. You will also have no access to the money and no ability to contribute more. Fixed rate bonds require a large minimum amount such as £1000 but are a great option for long term savings.
Individual savings accounts(ISA):
ISAs are just like regular saving accounts, except they don't have a minimum monthly requirement ,are tax free and have slightly worse off rates. There is a limit on how much you can invest in an ISA every tax year and in the 2017/2018 tax year was £20,000. ISAs allow you to make regular payments or even withdraw all your money. Some ISAs offer fixed or variable rate( this means your rate can fluctuate with the market) but the fixed rates are usually only available if you lock away your money for a minimum term.There are different types of ISAs , cash ISAs which hold your money in cash. Stocks and shares ISA wil invest your money in the stock and shares. These are usually the best option but you risk losing your money as well. There are also innovative finance ISAs which can be used to invest in a variety of peer to peer lending platforms.
Notice savings accounts:
Notice accounts as the name suggest are saving accounts which allow you to give some notice before withdrawing your money. The more the notice, the higher the interest rate on offer. Notice savings accounts do not offer great interest rates but better interest rates than easy access saving accounts. Notice savings accounts usually require a high initial deposit.
Easy or instant access saving accounts:
Easy access saving accounts are accounts which allow you access to you money at any time and offer you low interest rates.You can open up an account with as little as £1 and contribute to the account as you wish.