Be Wise in Choosing the Right Savings Account

Barbara Jones
Checking Credit Card

The appropriate savings account can go a long way in helping you save a considerable amount of money. In order to help you go for the right savings account, here are some smart tips.

Chart Out a Savings Goal

Different accounts can be used for different goals. For instance, make use of an instant access account for saving for an emergency while a fixed-rate account can be used to save for a deposit related to a house.

What exactly do you wish to obtain from your savings? What is the amount you require to save? At what time do you require the money? You may wish to save a particular amount by a specified date or save for a particular thing such as a new car or a special day out. The savings goal that you have would serve to determine which account would suit you. Different accounts can be used if there is more than one goal.

When Comparing Rates, Know Yourself

How hands on would you probably be with your savings? Certain accounts present a high bonus rate crafted to tempt you. After a certain period, bonuses do tend to drop off. In case there is time to look around and you would love to switch for getting the best offers, set a reminder for switching at the time any initial bonus rate ends. If there is no time for switching, try to avoid accounts that come with bonus rates and go for a rate which is historically more stable. For this you can take help of different comparison sites.

Use Fixed Term Deposits or Regular Savings Accounts

Keep yourself away from structured products that are somewhat similar to cash bonds presenting a high interest rate. Such investments are risky and are not fit for cash savings.

Would you be able to set up a standing order with respect to the savings account or keep your money tied up for over a year? If you can do so, a bit more interest can be earned with a fixed-term deposit or a regular savings account or a savings bond. But keep in mind that with a fixed term account your money might not be available for immediate access, and there could be a considerably high withdrawal fee.

Be Wise With the Taxes

Ensure that your savings are covered by a relevant financial scheme. Moreover, try not to keep a very huge amount with a single banking group.

Are you paying income tax? If your answer is no, you may opt for your account interest to be paid as a gross amount, or else there would be automatic tax deduction. If you are paying tax, learn about the schemes wherein you would be able to earn tax-free interest. Ensure that you are being given a good interest rate so that lower returns do not cancel out the tax benefit.

Do not Gather All Finances in One Place

A firm or a financial institution might collapse and so it is wise to spread out your savings. Keep a limit on your deposit in each account.