A Brief Guide To Savings Accounts
Thinking about saving those few spare pennies? Considering getting a little something extra on top of what you have saved in your piggy bank? Here are a few basic guidelines regarding the various types of savings accounts available in today’s market.
Financial providers i.e. banks and building societies etc offer a growing range of savings accounts. They vary not only in interest rates but also in the way in which they allow you to access your cash. For instance, a straight forward Instant Savings or Access Account allows you to access you money instantly, unlike others which require a minimum of 30 days notice or Bonds which require you to invest your money for a fixed period of time.
Before selecting which account will work best for you, it is important to decide what you intend to do with the saved capital. For example are you saving for a holiday or do you want to put money aside and allow the interest to accumulate over a longer period of time? At the same time it is also important to include how you intend to access your money. There is no point having money tied up for a fixed period of time if you wish to access it instantly for use a few months down the line. Also, would you prefer the convenience of an internet banking service or have a branch based or telephone service? Would the interest gained be more beneficial if it were added monthly or as a cash bonus at the end of the year?
Typically an Instant Savings Account offer a higher rate of interest than an ordinary current account whilst allowing you to access it when and should you need it. There are also Notice Accounts which have a slightly increased interest rate but require a fixed period of notice before a withdrawal can be made. This notice period can range from 30, 60 to 90 days.
Bonds on the other hand offer an even higher interest rate and are a good option for long term savings, however these rates do tend to be fixed. Once a sum of money is deposited into a bond you agree for it to be held for a specified period of time. Further deposits or any withdrawals cannot be made and the standard term is anything ranging from 6 months to 5 years.
Another alternative which proves to be very popular, is an ISA account (Individual Savings Account). This type of account permits you to save up to a certain amount each year completely tax-free. Each provider has limits and restriction as to how much you can save in any one year however the interest rates are competitive and naturally tax free. The more your balance rises over the years the higher the percentage of interest you earn. The normal deposit allowance for each tax year is set at £3,000 but deposits can be made instantly depending on the terms and conditions of the account. However once you have reached your maximum deposit allowance for the tax year you cannot top this up regardless of any withdrawals made.
So, before committing to any type of savings account it is important that you understand the withdrawal limits and what exactly the applied interest rates are. However, by investing your money in some form of savings account you are sure to be making the most of your money by receiving benefits in the form of interest earned cash.
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Published on September 30, 2007
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