What are the savings options available?

Published on
23 October 2019

If you are thinking about saving for a rainy day, there are a number of options available to you. Depending on what is important to you will determine which saving option you take. For example, how long you can tie your cash up for, how quickly you are likely to need access to it, and whether you pay tax.

Instant access savings accounts are ideal for money you might need in a hurry. If you have a little stashed away in the event of an emergency, it should be in this type of account so that you can immediately meet any unexpected costs.

If you have an internet-based bank account you may also be able to open an online instant access savings account and operate it by transferring funds to and from your nominated current account.

Remember though, not all instant access savings accounts are the same. Some telephone and internet-based accounts claim to offer instant access, but you may have to wait a few days for a cheque or transfer to your current account if you want to withdraw all your cash.

Traditionally, your savings earn a better rate of interest if you agree to lock them away for a period of time. The compromise is that you cannot access your money immediately.

With notice accounts, you can only get your cash by giving notice of your intention to withdraw it. For example, a 90-day notice account would require you to wait three months to get your money. You pay a penalty if you need it earlier.
Before you tie your money up, make sure the return is worth the commitment. There are instant access accounts which offer rates that are as good, if not better, than notice accounts.

Individual Savings Accounts (ISAs) are savings accounts where you earn tax-free interest. However, there are limits on how much you can deposit each tax year. Although cash ISAs do not always offer the highest rates of interest, you do not pay tax on the interest received so they usually offer a better return than ordinary savings accounts. A standard-rate tax payer can easily compare accounts by looking at the gross rate on a cash ISA and the net rate on a standard savings account.

If you are a non-taxpayer then you should opt for the highest paying savings account, regardless of whether it is an ISA, as you are entitled to receive your interest tax-free anyway.

Another saving option is a regular savings account which is designed for those who want to put a regular amount of money away each month.

These will often only be offered to customers who have a current account with the provider. These accounts can pay very attractive rates, but they often have conditions attached to them, which if broken will lead to a loss of interest.
Some regular savings accounts also offer an annual bonus on top of their interest rate. Again, if you fail to meet the required conditions you may lose the annual bonus.

Some simply pay an impressive basic savings rate - but limit the amount you can put in each month.

Most of these accounts limit the number of withdrawals you can make each year so they aren't much good for emergency cash but they are an ideal way of getting into the savings habit.

Click for details of the Cumberland’s savings accounts. Alternatively why not book an appointment with one of our friendly and expert team to review your savings options?

This article should not be relied upon when making investment decisions. Always obtain financial advice.

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