Five Different Types Of Savings Accounts To Suit Your Needs

Excluding my credit cards, I have ten different accounts that my money is spread across. This might seem a little crazy but they all do different things, some are ISA’s and bonds I can’t touch. Some are accessible but savings accounts. And some are just used to separate out the bills and spending money.

There are so many different types of accounts out there depending on what you’re saving for. For example, I have our house deposit and I know we won’t be touching it for a year. So I put it in a fixed year bond to get some good interest. We’re saving for house renovations so while I hope we won’t take out from it I chose an instant access ISA just in case we need the money.

Shepherds Friendly surveyed 2,000 adults and found that 62% of UK savers use a regular cash savings account. With 37% using a cash ISA and 14% with an investment ISA. While regular cash savings accounts are great they might not always be the best option for your savings. Here are some of the different savings accounts available so you can work out what suits your needs best. There are loads of different options but these are the main five. And I have four out of the five of them.

Cash savings account

If you move money around a lot and money moves in and out of your savings account all the time then this might be best for you. It’s just a bog standard normal bank account but many come without a card so you can’t spend money from it. You can earn a little bit of interest from them but that depends how long money stays in the account. If you’re more about cash storage and not cash savings then a regular savings account is an easy option. I have a few of them which I use more for money just coming in and out of my account.

For example, any blog payments or money I earn goes into a cash savings account. This means it doesn’t touch my general day to day account and get confused (or instantly spent). And I can track it easier, but I know it’s then going to be quickly moved to another savings point from here.

These accounts are the easiest to set up. If you do it with a bank you already have a current account with it can be done in minutes.

Regular savings account

With a regular savings account, you have to commit to paying in a specific amount of money each month. Dependant on the bank this can be between £25 and £500 per month. But you need to commit to it. So this is great if you have a regular income and know how much money you can put away. This puts you in a good position as soon enough you’ll be used to not having that money.

Generally, with these accounts, you may not be able to make a withdrawal. Or the amount of them is limited until the fixed term ends. But the great thing about these is they give higher interest rates as they know you’re committed to putting in money every month for 12 months say. If you have a specific goal and know you want to buy something in a year’s time this can be a great way to save for it. Or if you’re just looking to build your rainy day savings.

Instant access ISA

An Individual savings account (ISAs) work in the same way as a normal savings account except any interest you earn is tax-free *hooray*. There are so many ISA’s on offer with fixed or variable rates but they tend to be higher than normal savings accounts.

Each tax year there is a limit on how much you can put into an ISA. At the moment it’s just over £20,000 so if you’re saving a lot you need to keep a note of this. This figure is across all ISA’s you have so if you have two they can only have up to £20,000 across both.

I use these quite a lot and put in all of our savings for expenses when buying a house into an ISA last tax year. And then I use one now for our regular house renovation savings. At least this way I might make some money when we come to buy in 2020.

With an instant access ISA you can pay in how you like in regular payments or lump sums. And you can access it and take out money when it suits. Although if you take out the money you’ll miss out on interest. You can get some great interest levels and it’s worth shopping around before you commit to one.

Fixed ISA

A fixed ISA works in the same way as above but you can’t access or withdraw money for a set amount of time. I’ve had 1, 3 and 5 years fixed ISA’s before and generally the longer you leave it the more interest you’ll get. Although this isn’t always the case so it’s worth shopping around.

This means you can deposit however much money into your fixed ISA. Then you can’t take it out until the end of your term. You can continue adding money to your ISA throughout the period so you can use it a savings account. Perhaps you want to add in a certain amount every month, well you can. These are much better suited to long-term savings but can leave you with a good pot of interest at the end.

Fixed rate bond

Fixed rate bonds are great if you have a single lump sum you want to set away for a period of time. They generally give you the best interest rates but you can only deposit once at the start. Then your money is tied up for however long you choose. Terms can range from 6 months until 5 years but most commonly they’ll be 1, 3 or 5 years. During this time you won’t be able to access your money. But you’ll get yearly interest on your investment and the interest rate is fixed. So if there’s a great interest rate and you know you can commit to longer lock it in for the best return.

These types of savings are great if you have a lump sum. You’ll know how much interest you’ll earn from the start as the interest rate is fixed. Of course, this can be a negative as if the rate increases during your term you’ll be left on your fixed rate. But that’s a risk you take with savings.

I used a fixed rate bond when I sold my flat to put aside the money for our house deposit. I knew I wasn’t going to be adding to it and I knew I wouldn’t need to access it for a year.

What do you use for your savings?

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