Do you want to kick-start your savings for the coming year? This is the ideal time to get ahead on your financial goals and a great way to do this is with saving whatever you can, as often as you can. But you need to know exactly what to look out for when choosing the best savings account for you.The first account you opened was most likely a savings account. It is also very likely that you opened it as a child. Most people become familiar with savings accounts at an early age. By the time they become adults, they think they know all there is to know about these accounts. Not true! Consider the following factors before you open such an account…
Most people lack the discipline and patience required to save money every month. The banks know this. So, to encourage you to save, they do two things. Firstly, with your approval, they can automatically transfer a fixed sum of money to your savings account. This is the best way to make sure that your savings grow month-on-month. Secondly, they can help you save more by waiving any monthly fee on your savings account, giving you a bonus for saving, offering you a competitive interest rate, or all of the above. Opening a savings account with your current account provider means you can transfer money quickly and easily between your linked accounts using online/mobile banking.
NO MONTHLY FEES
Some banks will charge you a few pounds every month for banking with them, and the fees can be higher if you have a savings account. Although the account charges seem little, they all add up over the course of a year and will eat into your savings and interest. Besides the monthly fee, some banks will charge you a fee if your account remains inactive for too long so, before you open an account, first consider the impact of such fees on your savings.
LOW MINIMUM BALANCE
Although the money in the account is yours, banks sometimes set a minimum balance, which can be a few hundred pounds. Some savings accounts can’t even be opened with a balance of less than £100. In some accounts, when you dip below the minimum balance amount, the bank charges you a fee – eek! You don’t want to lose money on charges if you’re trying to save, do you?! If it’s likely that you’ll be dipping into your savings and drop below the minimum balance occasionally, the best savings account for you is at a credit union, where the minimum balances can be much lower.
SENSIBLE WITHDRAWAL LIMITS
To encourage you to save, banks can sometimes restrict the number times you can withdraw money from your savings account. This is especially true with some long-term ISAs. Sure you’ll get your interest tax-free, but there might be a specific term (it could be a number of years) that you have to keep your money in the account for before you get this benefit. Some even set a limit on the value that you can withdraw or transfer. Although they do so in good faith, you might consider such limits too restrictive. In which case, look for a bank with a lower limit and no restrictions, so that you can access your money if you need it at a moment’s notice. But, if you do, remember that when you withdraw money from your savings account too often, you defeat the purpose of having one!
To choose the right savings bank account for your needs, go for an account that allows automatic transfers and mobile check deposits. Also, select accounts with low monthly fees, minimum balances, and withdrawal limits. Finally, ensure the account has deposit insurance.