UK Savings Week (18th to 24th September) is upon us again, providing useful hints and tips to help us start our own savings journeys, by taking control of our money, setting goals, keeping focussed and by celebrating our successes. Starting to save can be difficult, especially whilst we are living through the current cost of living crisis. However, putting away even a small amount regularly can really help build your financial resilience, meaning you have something to fall back on if you had to deal with any unexpected costs, like a car or washing machine repair. Whatever you want to save for - something small like a birthday present or a day out, to larger savings goals, like buying a car or a holiday - why not visit the UK Savings Week website here for some great information, guidance and support to help you set your savings goals and keep you on track to achieve them.

Once you’ve set your savings goal or if you’ve already started saving, it’s so important to choose the best account for your savings. With around £260bn of household savings sitting in accounts that pay NO interest, it makes sense to find the one that suits your needs and earns the best available rate of interest, to help your savings grow more quickly. 

Here’s a summary of the different types of savings accounts available from the main banks, building societies and credit unions plus some alternative options, to help you decide which fits your savings plan the best:

Instant Access Accounts: these are also known as Easy Access accounts. These are flexible, basic savings accounts, usually only needing £1 to open. Interest rates are normally low, and deposits and withdrawals can be made at any time, so they are a great place to build up a cash fund for emergencies.

Regular Savings Accounts: these are also known as monthly saver accounts. These accounts require you to save a set amount each month, for a fixed period, and offer a better rate of interest on your savings in return. They are less flexible as there are often strict rules regarding withdrawals or the total amount you can save so make sure you check their terms and conditions to be aware of any restrictions. These accounts are useful if you have a fixed amount of money available to put away each month towards your savings goal.

Notice Savings Accounts: these savings accounts normally require you to give a set period of notice before you can make a withdrawal, for example telling them 30/60 or 90 days in advance of withdrawing any money. You may earn slightly more interest in this type of account, but if you needed to access your money quickly, you will probably pay a penalty/lose interest so they’re best suited to savings that you won’t rely on for emergencies.

Fixed Rate Bonds: these are accounts where you can deposit a lump sum of your savings for a set period, usually from 1 to 5 years. The interest rates offered can be higher than for other savings accounts and increase the longer you can put your money away for. However, these better interest rates mean you won’t have access to your money for the duration of the bond. Some bonds may allow you to make a withdrawal in an emergency, but they will charge a penalty/deduct interest to do so. These bonds may be suitable for those who already have savings to invest, who want the assurance of a fixed rate with a guaranteed return on their money, and who won’t require access to their savings for the term of the account.

Individual Savings Accounts (ISA): these savings accounts differ from others as they offer tax-free interest payments. Three of the main ISAs available are the Cash ISA, the Stocks and Shares ISA and the Lifetime ISA, each having their own terms, conditions, and savings limits. There are restrictions on the number of accounts you can hold and contribute to at any one time and the maximum amount you can save in any tax year is £20,000 across all the ISAs.

Cash ISA: you can choose between an easy access, a regular saver, or a fixed rate Cash ISA and each of these will have their own interest rate and rules regarding deposits and withdrawals, but all will pay your interest free of tax. This type of ISA may be suited to someone who wants a secure savings account, who may need to access their money in the shorter term (next 5 years).

Stocks and Shares ISA: this ISA allows you to invest your savings into a wide range of shares, funds, investment trusts and bonds and any profits are paid tax free. You can deposit a lump sum or build up your investment over time however there are fees and charges associated with this type of ISA, for buying and selling shares and the management of your investment fund, for example. In addition, it’s important to remember that the value of your investments can fall as well as rise and you may not get back what you invest. This type of ISA may be suited to someone who is looking for a longer-term investment, who is comfortable and understands the associated risk of investments.

Lifetime ISA: this ISA can be used to buy your first home or save for your retirement. You can put in up to £4,000 each year, until you’re 50 and this amount counts towards your overall yearly ISA investment limit of £20,000. Each year, the UK Government will add a 25% bonus to your savings, up to a maximum of £1,000 per year. If you make a withdrawal for anything other than your house purchase or retirement, you’ll pay a withdrawal charge of 25% as you won’t be entitled to receive the Government bonus anymore. You can find more information on the Lifetime ISA here. This account is specifically for those looking to boost their deposit for their first home, or as a tax efficient way to save towards their retirement.

Credit Union Savings Accounts: these are a different option to those offered by the high street banks and building societies. Credit Unions are non-profit organisations, owned by the people who use their services. Members of a credit union usually have a common bond, for example living or working in a certain area, or those working in a specific profession and any profit they make can be invested in their local community, used to improve their services and used to reward their members. They offer a range of savings accounts that can pay a fixed rate of interest or as is more common, they pay the account holder a yearly “dividend,” as a way of sharing the credit union’s profits with its members. Employers often work with credit unions to encourage their staff to save through salary deduction schemes and these have proven very effective as it makes regular saving so easy. A credit union savings account may be suitable for those that want a flexible, convenient way of saving and those who want to support the community they live or work in.

Help to Save Account – This is a UK Government backed savings account designed specifically for those in receipt of low incomes. If you receive Working or Child tax credits or Universal Credit, you may be eligible to apply. Account holders won’t be paid interest, instead they can earn a bonus of 50p for every £1 they save over 4 years, with the potential to earn a maximum bonus of £1,200. You can find more information and check your eligibility for the Help to Save account here.  

Automatic Savings Apps: these applications review your bank account activity using Open Banking technology, work out what you can afford to save, and then move money automatically to your choice of one of their varied savings accounts. You can find out more about Open Banking technology and how it works here. If you need to amend the amount you save, or need to access some of your savings, you can do so easily via their app. These savings apps and their accounts could suit those who prefer managing their money digitally and those who want a convenient and hassle-free method of saving. Make sure the to use apps that are regulated and authorised by the FCA.

Challenger Bank Savings Accounts: these newer online - based banks offer a wide range of stand-alone or current account linked savings accounts. You can fund your savings account via one-off transfers, by setting up regular payments or by using the round up function. This is where your is spending is rounded up to the nearest pound and the difference is then transferred into your chosen savings account, so you’re saving money as you spend. These accounts may be suitable for those who want a flexible and convenient way to save and those who prefer to use the latest technology to manage their savings.

Finally, as you can see there are a huge range of savings accounts on offer to suit every pocket and lifestyle. It’s important to pick the right account for your personal circumstances and savings goals, whether that be saving towards Christmas or towards your retirement, so take time to check the following:

Interest/Interest Rate - Is it a fixed rate? Is it an introductory rate and if so, how long does it apply for? When/How is interest paid?

Access to money – Who can apply for this account? Can I access my money whenever I need to? Do I need to give notice to access my money and if so, how much? Will I be penalised if I make a withdrawal or close my account?

Terms and conditions – Is there a minimum deposit required to open the account? Do I need to save a regular amount monthly? Are there any charges I need to consider? Do I need to keep the account running for a set period?

Protection – Are my savings protected if the account provider goes out of business?

If you’re interested in learning more about savings or other money management topics, why not register to access our free financial capability e-learning modules here.


Please note that this blog is for general guidance purposes only. Money Advice Scotland is not regulated to provide money advice or financial advice. We recommend seeking advice from a regulated money adviser if you are facing money worries or financial difficulties. or from a regulated financial adviser for anything else related to money or investments.