How To Choose The Best Savings Account

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The sheer range of savings accounts available on the high street today can be mind-boggling. Designed for people who want to save regularly or even just want to put aside the occasional small amount, savings accounts offer interest on the money deposited into the account, giving you the chance to make your money grow. But with so many choices on offer, what do you need to think about before opening a savings account?

Does it work for me? Good financial planning includes putting a little aside to cover emergencies or to buy big ticket items. But with budgets still tight from the effects of the economic recession, it's harder than ever to find some spare cash to put into a savings account for an emergency. The first question to ask yourself is how you want to save. Do you want to put aside a set amount each month or put a lump sum away? Does your budget allow you to allocate a certain amount every month for saving, or is your financial situation a little more 'fluid', meaning you can only save occasionally? You also have to ask yourself how much you can afford to save. There is no point putting too much into a savings account only to have to 'dip' into your savings regularly to top up your current account finances. Be sensible about your saving and only save what you can afford.

What commitment do I need to make to the account? Some savings accounts have specific amounts that you have to save every month to benefit from a higher interest rate and therefore a better return on your money. Other more flexible accounts allow you to start saving with just £1. These types of accounts are ideal for younger savers, as they allow children and young adults to get into the 'saving mindset' from an early age. However, other accounts require a set amount to be deposited each month or have a higher opening deposit requirement. So check carefully how much the savings account that interests you requires you to put in and if it corresponds with the amount you feel you can comfortably save each month.

What's the interest? This is where savings accounts come into their own. They pay a much higher rate of interest on the funds than a current account does, but again, you need to check the small print. Most savings accounts have a tiered system of interest rates, depending on the amount you have saved in the account. If your savings drop below a certain level, you could lose out on a higher rate of interest, so be sure you know the figures before you open an account. Also consider if the account has a fixed or variable rate. A variable rate will be linked to the Bank of England's base rate, so may fluctuate according to outside influences.

How easy is it to get at my money? This is often where things get confusing. High interest savings account do give you a much better return on your money, but you may find that accessing that money requires giving the provider up to 90 days notice before you can withdraw any of your money. If you are putting money away for a specific goal such as a car or a holiday next year, an account that requires a notice period to withdraw funds may be ideal. But if your savings account is one that is designed for emergencies and those 'rainy day' situations, you may need to get to your money quickly. In that case, an instant access savings account is a better idea. You will invariably find that this kind of account does not give you the same kind of interest return on your savings, but at least you can get to your money quickly and when you need it most.

The best way to find the right savings account for your needs is to use a comparison website. This will give you an at a glance list of the savings accounts offered by a wide range of lenders, the interest rates they pay, if there is any withdrawal notice period or even if there is a bonus for saving more than the minimum amount. By comparing what is on offer against what you want your savings to achieve, you can pick the right account that gives you a good return on your money and the flexibility to get at your money when you need to.

Article Source: http://depositarticles.com/

Mark Bartley covers a number of financial topics like savings accounts. In the future there will be further reviews from Mark on different subjects like this.

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