Savings Accounts Guide
Unfortunately savers have been hit by the recent falls in interest rates. Whereas in the past it was possible to earn an income from the high interest rates offered on savings, with interest rates recently hitting a 40 year low of 3.5%, this is no longer the case. Over the next two years interest rates are expected to rise to around 4% to 4.5%. It is therefore still important to shop around for the best deal.
Current Accounts are not particularly good as a saving strategy. They are generally used to pay for monthly expenses and the interest rates offered on them are poor.
Postal Saving Accounts
A postal savings account is an account whereby you have to make deposits and withdrawals through the post. They generally offer good interest rates as it is expected that the money will be left within the account for reasonably large periods of time.
Online Saving Accounts
There are several online savings accounts available that offer very competitive interest rates. The Nationwide e-Flex account and the Ing Direct Account are two such examples. These tend to be linked to your current account and you can effortlessly transfer funds between the two. With the advent of the Internet, Online Savings accounts are an excellent method of investment as you get all the saving benefits of a postal account without any of the hassle.
Notice and Instant Access Accounts
Savings Accounts fall into two categories. Notice accounts will pay a slightly higher rate of interest than Instant access accounts, but on the flip side you must, as the name implies, give notice before you are permitted to withdraw your money.
Fixed Rate Deposit Accounts
If you deposit funds in a fixed rate deposit account, you will earn a guaranteed interest rate. However, your money will be tied up typically for a year. If you need to get at your money before the term finishes, you will generally be penalised and not receive the full interest.