Do you know the difference between a regular savings account and a fixed-rate bond? Is your money earning as much interest as possible? Have you worked out how much you can realistically save each month?
If these questions have made your head spin, then you’ve come to the right place.
With interest rates rising and the cost of living crisis making it even more important - and quite frankly harder - to have a savings account, your money needs to be in the right place.
But is there a right place for your savings?
The simple answer is yes - as long as you know what you’re saving for. There are many different types of savings accounts in the market and each one works slightly differently, making them suitable for a range of savings goals.
If you are still baffled, let’s look at some popular savings goals and link them with a suitable savings account.
One of the most popular - and sensible - reasons for saving is to have a rainy day fund. This fund is perfect if you are faced with an unexpected bill or you would like to buy a ticket to see your favourite band, as you’ll have the money available without facing any debts.
The key to a rainy day fund is that it’s accessible, as you won’t know when you’ll need the money. This is why an instant or easy access account is a great option. This type of savings account is flexible and enables you to withdraw money whenever you want. However, some easy access accounts do have withdrawal restrictions so it’s always worth reading the terms and conditions.
One of the top accounts in the market is Chip’s instant access as it has an interest rate of 4.51% and you can withdraw and deposit almost instantly.
If you would like to save for your first home, then there is a savings account that can help. The lifetime ISA was created to support people to buy their first home or save for retirement. So, if you are a first-time buyer then this ISA is worth exploring as you can save tax-free and it comes with an attractive bonus of up to £1,000 each year.
A lifetime ISA has an allowance of £4,000 a year and the government will give you a 25% bonus as a reward. However, there are some conditions attached, so make sure you are following those to get the full benefit.
Moneybox is currently offering a cash lifetime ISA with an interest rate of 4% and you can open it with as little as £1.
This year has been very difficult due to rising prices on food, expensive household bills and increasing mortgage and rent payments, so going away on holiday hasn’t been a priority.
However, if you are hoping to get a well deserved break next year, now is the best time to start saving. Saving little and often can soon help you to build up a substantial savings pot and a regular savings account supports this.
A regular savings account can help you to develop a savings habit as you are normally required to save a set amount each month, and this can vary from £10 to £300.
Bear in mind that the top regular savings accounts are normally linked with current accounts, so you might have to switch current accounts first. For example, First Direct’s regular saver has a 7% interest rate with a limit of how much you can save each month (£25-£300), but you have to hold a First Direct 1st Account.
If you already have a lump sum of money saved, but would like to keep it for a big occasion like a wedding, then you might want to consider a fixed-term savings account. Currently, fixed-term accounts are offering top interest rates so there is an opportunity to earn a lot of interest on your money.
Remember, this interest does come at a price, as you won’t be able to access your money for a set period of time. This varies from six months to five years, depending on the account, so think about when you might need the money.
Tandem is currently offering an 18-month fixed-rate savings account with a competitive interest rate of 6.15%.
Another popular savings goal is keeping it within the family and focusing on saving for your child’s future. This could be a savings fund that they use for university or buying their first car.
There are many children’s savings accounts available, and they include the ones we’ve mentioned above, for example; easy access, fixed-rate, regular saver and there’s even an ISA specifically for children called a junior ISA. A junior ISA is a way to save tax-free and it has an allowance of £9,000 a year.
Explore the different options available and be realistic about how much you can save each month. You could even encourage your child to open their own savings account as a way to get them into the habit of saving and spending responsibly.
As a trained journalist, Lucinda has spent the past 10 years writing and editing content for regional and national titles, including The Mirror, WalesOnline and Manchester Evening News. She is now a personal finance editor and specialises in savings, helping people to make confident financial decisions so they can save for what matters most.