A Beginner’s Guide To Choosing A Savings

Know Your Needs:


Choosing the right savings account is like choosing the right tools when building something – it’s important to know what you want to build before you can pick the right tools for the job. So we put together a little starter guide to help you get thinking along the lines of what your goals are and what kinds of savings accounts could help you achieve them in the long term.

Short-Term Savings:


Different savings accounts have different notice periods (waiting times for you to be able to withdraw your funds) – therefore it’s important for you to decide if you’ll be needing your savings within the next 5 years or so (the typical time for longer-term savings accounts). Some of the kinds of short-term savings accounts out there:

  • Easily accessible or even instant accounts:

    Pretty good for an ‘emergency savings’ type of account as they often allow you to easily withdraw the money without any penalties or issue.

  • Fixed-term deposit accounts:

    The work well if there is money you absolutely don’t plan on touching for the next few years. Some of them are for a single year or a fixed amount of time during which you will have to pay a penalty if you try and withdraw the money. Their savings rate is typically higher than that of the quick access accounts.

  • Regular savings accounts:

    They come in all shapes and sizes and usually are centred around the premise that you will deposit a fixed sum of money each month. This can really help if you have a budget in mind or something that you need to save towards the following year (like a holiday or a wedding) – you know you will hit your target as long as you keep depositing the set amount monthly.

Generally speaking, the rule goes that the longer you are willing to lock your money or omit to a regular savings deposit, the more favourable interest rate you will receive.

Pay Attention To Tax:

Be aware that there is such a thing as a “tax-free savings allowance” – Cash ISA’s (Individual Savings Accounts) Allow you to save up to a certain amount (roughly £20,000) without paying any tax on the interest you earn.

Medium-Term Savings:


If you can keep your savings locked away for around 2-5 years you’ll probably getter offered higher interest rates on your savings. In this case you could look t fixed-rate bonds and perhaps consider longer-term time periods on your chosen savings account.

Whilst the interest rates are often higher, make sure to be aware of any potential downsides. Often with these kinds of savings accounts the provider will not allow any withdrawals (within the allotted time frame) or sometimes not even any additional deposits. Sometimes open one of these accounts is conditions upon you also open a current account with the provider – something which may not suit your needs.

Be sure to shop around first and utilise your cash ISA limit first as it may actually give you the best rate available!

Long-Term Savings:


Whilst all the options mentioned above are also available for longer time periods (simply don’t withdraw your money!) there is another set of options for the longer term.

If you are willing to keep your money tied up for 5+ years, investing – whilst riskier than a mere savings accounts – can pay out much larger returns. The golden rule is you shouldn’t invest anything that you aren’t willing to take a loss on.

Stocks and shared ISAs allow you to keep the returns you make without paying tax – the risk is that you are invested in stocks and shares that could go down instead of just being invested in a bank.

There are a myriad of other options in the world of investment out there, but we recommend you seek unbiased, professional advice when looking at the options that can best suit your individual risk and financial needs.