Cash savings

It's often tempting to spend all your pay immediately, but if you can afford it and don't have any debts, saving money for the future is a big step towards being MoneyFit.

Choosing between savings options is easier than it looks. There are hundreds of accounts, but only a few types of account - some for easy access to emergency funds, some for saving regularly and some for growing your money.

Check the Annual Equivalent Rate (AER)

The AER shows how much interest you will earn over the course of a year. It takes into account how often the interest is paid and what effect compounding will have.  So it lets you compare how much interest you will earn on an account where interest is paid monthly with one where interest is paid once a year.

So in accounts where interest is paid monthly the AER will be lower than that where interest is paid once a year. But if interest gets compounded, it may offer a higher return than the interest paid once a year.

Cash savings accounts

Take a look at the table to see which suits you best. And see how your money grows with compound interest in this video from the Money Advice Service.

Types of cash savings accounts

Instant and easy access accounts The place for your emergency savings. They may pay more interest than a normal current account, and the money is on hand when you need it.
Regular savings accounts For saving a monthly chunk of your income. There are rules about how much you can put in and take out, but you get a slightly higher interest rate.
Fixed-term deposit accounts For setting money aside for a set length of time. A fixed rate of interest is set in advance, so you know exactly how much you'll end up with.
Index-linked accounts Like fixed-term deposits, but the interest rate changes in line with inflation – you can't be quite sure what you'll get at the end of the term.
Cash ISAs (tax-free) Tax-free savings. You get an annual allowance – so make the most of it! A Cash ISA is usually a simple savings or deposit account. You can get a Cash ISA from the age of 16, or a Junior ISA for under 18s.

Comparison websites are a good starting point for anyone trying to find a savings account tailored to their needs.

We recommend the following websites for comparing savings accounts:

Remember:

  • Comparison websites won’t all give you the same results, so make sure you use more than one site before making a decision.
  • It is also important to do some research into the type of product and features you need before making a purchase or changing supplier.

Next steps

Not quite sure which to go for? Click on the account types in the table to read more.

You save faster if you have a goal in mind, see Goal setting.

Last reviewed: 05/07/2017

This content has been provided by the Money Advice Service