For those lucky enough to have a surplus in their finances each month it makes sense to open up a savings account and make this additional revenue work for you. If you have money sitting in your current account it will generate little or no interest, subsequently it is advisable to transfer this money into a savings account with a higher rate of interest. But with such a variety of saving packages available on the market the choice for the consumer is befuddling, hopefully the following article will give some advice on the thinking process and factors that must be considered before opening an account.
The choice of savings account is dependent upon several factors. For instance, you may need ready access to your funds at any time; hence an instant access account would be the ideal choice. However if you want to gain the best interest rates it is advisable to look at the accounts that hold money for a period of time without the option to make transactions. These are generally termed as notice accounts due to the fact that a period of notice must be given in order to extract funds or make any transactions. Depending which sort of notice account is opted for; the period of notice can be anything up to ninety days, meaning that forward planning is needed when making purchases and payments.
In recent years however the notice form of savings account has become somewhat obsolete due to the introduction of high interest instant access accounts. It is now a possibility to have all the benefits and high interest rates of notice accounts with the convenience of being able to withdraw money at any time. Tax however can remain a problem so for those who want to sidestep the tax man, an individual savings account or ISA is the most advisable package to open. These tax free accounts allow savers to avoid paying taxes on their finances although the interest rates may not seem that appealing, the fact they are tax free makes them worthwhile. The only downside to ISAs is that the saver is only allowed to put three thousand pounds into the account in any tax year, although this is a necessarily evil for good rates of interest and instant access.
The other option is to open a regular savings account. Typically this will require a deposit during the opening process although some banks require this to be as little as five pounds. As these accounts rely upon a regular investment the interest rates are high. The interest though is only payable at the end of each year in the form of a bonus and if the saver does not keep up the regular payments, this large one off payment will not be gained. Subsequently it is important to have a regular income before utilise regular saving accounts. Understandably, with such a large bonus at the end of the year the saver is instilled with a saving ethic from the outset.
Hopefully this article has highlighted some of the more common varieties of savings account on the market today. Banks differ in terms of interest rates and services and hence the consumer is always advised to assess financial packages carefully, taking a logical and conscientious approach to monetary planning. By taking this advice on board it should be possible to find the perfect solution to saving needs, safeguarding for the future and of course, the proverbial rainy day.
Author Resource:
Financial expert Thomas Pretty looks at the benefits of placing funds into a savings account and the variety of accounts on the market today.
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