Many people use coupons and comparison-shopping to save money.
However, far fewer really save by placing their hard-earned money into a savings account. Contributing to a savings account is an effective way to avoid spending money unnecessarily.
It creates a reserve for emergency expenses and retirement, two things many people are not prepared for financially.
Some savings accounts offer the ability to earn money through interest, making savings an even smarter investment.
Instant access savings accounts are designed for people who want to earn interest on their savings but still have access to their money.
Money can be withdrawn and deposited as desired so the interest rate is usually lower than that offered by other types of savings accounts.
These rates are still better than what a current account offers
An instant access account can typically be opened and maintained with a small balance, which could be as little as £1.
Account holders can withdraw money at any time without an interest rate penalty. Individuals who have a small amount of money available to save and anticipate needing access to it should consider this type of account. Interest is usually paid annually but some accounts offer monthly interest payments with a small reduction in the interest rate.
Someone who wants to save a little money each month and earn money on this savings without giving up access to the funds may find this the appropriate tool.
An easy access savings account also offers the ability to save money and withdraw it. Some accounts do have withdrawal penalties and others offer short-term savings bonuses. Minimum investment requirements range from £1 to £1,000 and interest rates vary from approximately 1.3 to 2.2 percent with gross bonuses varying from approximately one to 1.5 percent.
Monthly interest payments and online account access may be available
Fixed rate savings accounts with term deposit periods are designed for people who can do without their savings for a predetermined period. Terms typically range from six months to four years, with higher interest rates offered for terms at the longer end of this range.
The rate is fixed for the term of the deposit, allowing savers to know exactly how much their money will earn. Interest rate is tiered based on amount saved and interest may be paid monthly or annually.
It is never too early to begin saving and banks recognize this by offering accounts for children. Children up to age 16 can open these and parents can monitor the activity. Interest rate is variable and based on account balance.
When the child reaches age 16, the account may be eligible for conversion into savings in his or her name. Children can track their account changes to learn how saving money can earn money.
A junior cash ISA provides a way for parents to build tax-free savings for their children
This can be opened with only £1 and maximum amount of savings varies by tax year. Anyone may make a gift to the child by depositing money into this account.
However, withdrawals may not be made until account maturity, which occurs when the child reaches age 18. At that time, the account converts to an adult cash ISA.
Adults have several ISA products to choose from for their own tax-free savings. The basic one requires a deposit of only £1 and offers a fixed interest rate and the ability to make withdrawals. Once the maximum cash ISA allowance is contributed in a tax year, any money withdrawn may not be replaced in the same tax year.
Some providers offer a fixed introductory bonus to attract new account holders.