Most people will agree that having a solid financial platform is an important part of being comfortable in life. This is why it is so important to manage finances effectively; an element of this management is to open a savings account as this will generally give the user a high level of interest and a more secure means of holding funds.
For example, while it may be simpler to hold each aspect of finances in a current account due to the ease of use, it is ill advisable to follow this course of action. Savers will be superior rewarded with a savings account that has a higher interest rate and actively encourages saving. But what should the average saver do in order to put together a decent financial platform? What type of savings account is worth using?
Fundamentally the answer to this question is down to personal preference and circumstance. There are many different types of savings accounts out there to select from and it is only by looking at personal finances in detail that the correct account package can be chosen. Having instant access or having a great level of interest is up to you but it is only after taking a conscientious approach that it will be possible to find the most suitable form of account.
At the simplest level are the basic savings accounts available at many different banks. In most cases this variety of account will require the opener to have a deposit; however this deposit can be as tiny as five pounds meaning that this is an inexpensive way to save for many people. However the lower the deposit and the amount being saved can often result in poorer interest rates; in the majority of cases it is those who save the most that will receive the ideal interest rates.
In addition to deciding what type of account to choose there are also options in terms of accessibility of the funds. For instance on the market today there are two predominant forms of bank accounts; these are the instant access and notice variety.
The instant access account means just that and gives the holder access to their funds instantly; however, while this may be attractive it does not exactly ensure that savers save. If you’re less prone to control the tendency to pull money out it is advisable to use a notice account instead.
The notice variety of account gives the user a specific timescale when it comes to making withdrawals. In some cases this time period can be as much as ninety days. The reason this is put in place by the banks is so that users are encouraged to save and not dip into the finances regularly. The bonus of this to the customer is that as the bank has restrictions upon the withdrawals that can be made, the interest rate is typically much higher than an instant access variety.
Of vital importance with any savings account is to leave it well alone for anything except bona fide emergencies. This is because there is little or no point in putting money away if it is to be spent on a whim; ideally, whilst it may not always be a possibility to have money spare, any savings should be added to from spare money that is not part of the family budget. Understandably if the money is needed in the first place, the chances of it staying in an account are minimal.
Hopefully this article has highlighted the decision making process needed when selecting a savings account. Additionally it has hoped to show the importance of a savings ethic when in converse with the bank; without one, there is no way to make money work for you.
About the Author
Financial expert Thomas Pretty looks at the types of savings account on the market and why it is important to have a saving ethic when banking commences.
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