We all know the benefits of a great savings account. But not all savings accounts are the same. There are nuances to understand when it comes to selecting the right one for you.
There are plenty of options available, so here we outline some things to think about when it comes to choosing the right one to maximise your money.
Whether you’re saving for short or long term goals, it’s smart to always keep some of your investment in a cash account.
When it comes to choosing the right savings account, the general rule is that the higher the interest rate, the faster your savings will grow thanks to the power of compound interest. So, look for a higher introductory rates with a solid ongoing rate – it will turbocharge your savings straight away so make the most of it.
If you’re saving for a specific goal in the near future (such as school fees), you’ll want to be able to make regular deposits and have flexible access to your funds with no penalties. That’s where an online savings account savings account may help. But if you want a guaranteed return over a fixed period of time to lock away funds for a long term goal - like a home deposit, for example – a term deposit might help you get there sooner.
While it’s obviously helpful to see all your accounts in one online dashboard, it might also be all too easy to dip into your investments or transfer money back to your everyday account. If you don't want to risk temptation, a term deposit may be a better option.
If you want to have some cash available quickly (but still earning interest) and some locked away for a fixed term at a set rate, why not split your cash between an online savings account and a term deposit? By opening both you’ll have an online savings account where your cash will be accessible at any time, and a term deposit – which will likely earn higher interest and when the term rolls over you can decide whether to reinvest or transfer it back to the savings account.
The higher the interest rate, the faster your savings will grow thanks to the power of compound interest.
Some online savings account offers could come with strict conditions. These might include penalties for exceeding or not meeting account balance requirements, or no interest payable if you make a withdrawal. Some might also require a linked deposit account to maximise your interest rate.
To reach your savings goals, weigh up all those features before you decide which online savings account is right for your needs.
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