Choosing a savings account is not as easy as falling off a log. Your decision cannot be based on high-interest rates; individual circumstances are also worth taking into account. You must have a goal. Ask yourself – what you will get from a savings account, how much you want to put aside and when you need money. There is no one-size-fits-all savings account. As your purpose varies, the type of account varies too.
Having a savings account is mandatory that could serve you on a rainy day. Unexpected events are endless and they pop up without a warning. If you have enough money set aside, you could tide over unforeseen expenses even if you are out of work.
During unemployment, people rush into taking out guaranteed loans for unemployed, but you can avoid paying a lot of money in interest payments if you have had savings account.
Choosing a tailored account can be mindboggling, but the following tips can help you quickly come down on one side of the fence.
Instant access account for emergency purpose
If the purpose is to use an account for emergency reasons, you need to have immediate access to funds. Instant access savings account allows you to deposit and withdraw money whenever you need.
This is the best account if you fall out of money at the end of the month and you need it for something urgent. Such a savings account provides low interest. However, some institutions may provide you with high-interest rates if you have a current account with them.
If your target is to dip into this account during an emergency, this account is the best option. People who rely oftentimes on payday loans for unemployed should this account. It will help you avail funds as quickly as possible.
A notice account is a type of savings account that prevents you from immediate withdrawal. The bank will not allow you to access funds unless you have given notice. The notice period may vary from 30 days to 90 days depending on the policy of the bank. Interest rates with these accounts are higher than instant access savings account. However, you will have to do enough research before clinching a deal. With a longer notice period, interest rates will be higher.
You must note that these interest rates are variable. As the base rate of the Bank of England diminishes, the interest rate will also go down. The withdrawal is possible after the expiry of the notice period. Notice account can help you earn high interest and meet your planned expenses. This savings account is not worth it for an unforeseen emergency.
Regular savings account
A regular savings account will require you to pay in a fixed amount every month. In return, the bank will pay you higher interest rates than you would get with a current account or an instant access savings account. Depending on the policy of the bank, you will have to pay in from £10 to £500 every month. They will be set for a fixed period, for instance, one year and once it expires, the entire money will be transferred to your current account.
Make sure that you have a current account to qualify for a regular savings account. Some banks provide fixed interest rates and some provide variable interest rates. If you withdraw money before the term comes to end, the bank will impose a penalty. Regular savings accounts are the best option when you have to build up your savings.
Fixed-rate savings account
As the name suggests, this account will offer you a fixed rate of interest for a specific period. The advantage of such accounts is you are not going to get lower interest throughout the tenure even if the base rate of Bank of England drops down. However, you will not find it competitive if interest rates are likely to rise on other savings account during the fixed tenure.
You are likely to get a bonus if you do not make withdrawals unless the term expires. It is wise to invest in such accounts when you are certain that you will not need it for your other expenses including emergency. If you withdraw money earlier, the bank will impose penalties.
The bottom line
You will choose an account on the basis of your needs. You should do extensive research to compare interest rates. Some accounts promise to provide you with higher interest rates to attract you, but suddenly they drop off after a certain period.
You should not hesitate to switch to best deals even between the tenure, but try to look for a stable deal before choosing any offer. There are several comparing websites providing the facility to compare interest rates. Make sure that you choose a savings account tailored to your needs. Having a savings account can prevent you from being broke.