Whether you are saving up for a car, a house, or a six month backpacking adventure across Southeast Asia, a savings account with the right features and a good interest rate can help you get there faster. Here is a guide to choosing the best one.
What are you saving for?
There are many reasons why we save; perhaps you are setting aside your money to pay tuition at University to study your passion, or saving up to buy a new car because yours is about to fall apart. Or maybe you are saving up money to go travelling, buy a house, or start a family. Whatever your goals are, it is a great idea to save your money instead of buying things right away on credit card and then ending up paying more in the end thanks to steep interest rates.
However, if you do not have your money in the optimal savings account, you could be short changing yourself. It is important to choose the right account for your savings, to make sure that you are getting the most for your money possible.
Here are a few tips to help you choose the right savings account and watch your money grow:
- As a result of the current financial climate, many banks are offering increased interest rates on their savings accounts in an attempt to lure in a larger customer base. You can take advantage of this by shopping around to see if any other banks offer you a better deal that your current financial institution.
- However, always look for the catch because sometimes a bank will advertise a savings account rate as high as 10-12%, yet hide other pesky disadvantages in the small print such as a rule that a certain amount must be deposited in the account each month or that the interest rate will only last for one year.
- Also, watch out for accounts with bonus rates. These are also meant to entice customers, and the bonuses bump the interest up to a very attractive rate. But when the bonus expired you could be left with a very low paying rate, so be prepared to switch accounts once your bonus expires.
- Think about how easily you want to be able to access your money. Some savings accounts make it very difficult for you to take your funds out, which is good because it helps you save them but if you ever need your money in an emergency it’s good to know that you can get it right away. Try to find the right balance by choosing an account that offers instant access, without having to compromise on a good interest rate.
- If you are sure that you will not need your money for a year or two, why not invest it in a fixed rate bond and get a higher rate of interest? However, only do this if you are sure that you will not need to touch your savings for at least a year or more.
- A Cash ISA is a good choice because it is a tax-free account, which ensures you are getting the best rate for your savings.
- Be aware that some savings accounts require you to take out a separate investment bond, which could involve exposure to the stock market. This has the potential to pay off big, but also carries a lot of risk so be careful.
Choosing the right savings account is an important step in working towards your savings goals and getting the money together to fund your dreams, whatever they may be.
Jim is a blog writer who blogs constantly about money and also pens articles for clients such as Ulster Bank who can help with your regular savings accounts.