Guide to savings accounts
Different Types of Savings Accounts
Savings accounts are normally offered by banks or building societies.
The incentive is that you earn interest on it! You can either put in a lump sum of money or a little every month. You can access your money or make withdrawals from your account at any time.
The different types of savings accounts are:
• Variable rate: here the interest rate is liable to change at any time without much warning.
• Fixed rate: these accounts pay you a fixed rate of interest for a specified period of time. Withdrawing money before this time could have you paying penalty charges.
Choosing between variable or fixed rate of interest is tricky. It would be best to split your savings between these two accounts.
Listed below are some options of the different types of savings accounts that can be opened under variable and fixed rates.
Savings accounts with variable rates:
• Internet accounts: are operated online. These offer slightly better interest rates on lower balances.
• Cash ISAs: allow you to earn interest free tax. You can make investments up to a specified limit in a Cash ISA every year, which is transferable to different providers.
• Introductory bonus accounts: initially offer a higher rate in the form of a bonus which is for a fixed term. While the bonus might be fixed, the underlying rate is still variable.
• Instant access accounts: allow for withdrawals and instant access to the account at no extra charge.
• Monthly income accounts: pay you a monthly interest.
• Regular savings accounts: require you to fund the account every month so you can benefit of the rate. Access to money is not allowed or maybe limited.
• Over 50s accounts: are for people over 50 years of age and may offer preferential rates.
• Notice accounts: require you to give notice when withdrawing your money.
Saving accounts with fixed rates:
• Bonds saving accounts: guarantee you a fixed rate of interest. They differ in tenure and rate of interest payable. Short term, medium term and long term fixed rate bonds allow you to invest your money for periods between one to five years.
• Fixed rate ISAs: give you a fixed rate of interest on existing ISAs or new ones. Accessing money is easier unlike in the bond accounts.
Word of caution: keep your specific needs in mind while making your choice from among the different types of savings accounts .