Errolyn Smith from Smart Money People introduces a new savings quiz, which aims to give some guidance on which savings account might be best for you.
Whatever happens to the Bank Rate today (21 September 2023), it’s always good to have some savings.
Whether you’re on the hunt for your first savings account, you’re a serial saver, or you’re just looking to build up your savings pot, the team at Smart Money People has created a new savings quiz, which aims to give some guidance. Once completed it will suggest which savings products might suit you best.
Visiting the savings pages of any comparison engine may feel a little overwhelming. Deciding which savings account to go for can be tricky.
1. How much do you want to save
The first thing to do is to work out how much money you want to save. Some people prefer to syphon off an amount at the beginning of the month before they’ve had a chance to spend it. Others may only save what’s left at the end of the month.
Depending on your circumstances, you may be able to save the same amount each month or the amount may vary depending on your outgoings. Neither is right or wrong, but it may influence which product you choose.
2. How often do you want to save
A person who saves early in the month may choose to set up a direct debit to ensure they save immediately after payday. However, a person who saves their surplus funds at the end of the month may save a variable amount.
Many regular savings accounts require a commitment to saving to achieve the promised interest rates. If you need greater flexibility in the amount or regularity that you save, you need to look for accounts that allow this.
Some people will have built up some savings in their current account. Transferring a lump sum to a savings account may achieve better interest rates. Again, be aware that different accounts have different rules about how much you can save and how often you can add to this pot.
3. How long do you want to lock away your money
One of the most important factors is how long you are happy to lock your money away.
You may need instant access in case you have an emergency (e.g. dental work or car repairs). Or, you may prefer your savings to be inaccessible so you’re not tempted to dip into them.
Locking your savings away for a set amount of time, usually means you’ll get a higher interest rate.
You could consider having different types of savings accounts e.g. one instant access account to pay for emergencies, and a notice or fixed-term account to save for a wedding, house deposit, travel plans, etc.
Existing savings accounts
If you already have some savings, you’ll also need consider these, as you may not want to have all of your eggs in one basket.
The Financial Services Compensation Scheme (FSCS) protects amounts of up to £85,000 per person, per firm. If you already have savings with one provider and are reaching this threshold, it would be safer to choose a different provider for a new savings account.
Reviewing the type(s) of savings account(s) you already hold is good practice before committing to any new ones.
Personal savings allowance
The personal savings allowance (PSA) is an amount set by the government which allows you to earn interest on your savings without paying tax.
If you’re a basic rate taxpayer, you’ll be eligible for the PSA of £1,000 in 2023/24, meaning you can earn up to £1,000 a year in interest without paying any tax on it. If you’re a higher-rate taxpayer, this limit is £500. If you’re an additional tax rate payer, you don’t get any allowance.
What about ISAs
A cash ISA is a savings account that you don’t pay tax on, which were hugely popular when they launched in 1999. However, with the arrival of the PSA, ISAs became less relevant for many people.
That said, there are some great interest rates available on ISAs at the moment. Even if you aren’t likely to reach your PSA limit, they might be worth considering if the criteria suits you.
Which savings account would be best for you
We told you there was a lot to think about. If you’re feeling bamboozled, take the savings quiz to find out which account would be best for you.
Once you’ve narrowed down the type of account you need, research the savings providers that offer that product. Before you commit, read reviews left by like-minded people on the Smart Money People website. Comments include how easy it was to open an account, whether the product was good value for money, and what the provider’s customer service was like.
About Smart Money People:
Smart Money People is the UK’s dedicated financial services review website with over 1.5 million reviews (and counting!). The site and platform helps people and financial companies to create better outcomes with their money. Smart Money People shares the collective wisdom and experiences of customers to provide insights and ideas that will help shape the future of finance.