When we have worked for much of our adult lives and invested the fruits of those labours in caring for our children and ensuring their smooth transition into independent living we find ourselves able to invest some of our surplus income in providing savings for our future. Naturally, we want the best return on our investments. As this brief article will exhibit, the issue of cash savings accounts and which one to choose is far from straightforward, particularly during periods of economic downturn where the financial institutions are reluctant to offer anything other that parsimonious rates of interest. The first account that we will look at is the current account.
The Current Account
For reasons that will become clear, the current bank account is not one in which it is not always wise to invest your savings.
There are many current accounts that offer 0% interest on monies invested, regardless of the amount in the account. Obviously, being a current account you have unfettered access to your money and all the facilities that come with a current account, such as a cheque book and debit card but a combination of the low (or even non-existent) interest rates available and the fact that your bank is likely to have other savings options that are more beneficial and only marginally less flexible means that you should hesitate before leaving anything other than the bare minimum in a current account.
That means you should keep enough to service your monthly needs and ensure that any surplus is paid into a more efficacious savings account.
The next account we will look at is only slightly less flexible than a current account but it is almost certain to provide a greater return on your savings. This is the Easy Access Account.
The Easy Access Account
As its name implies, the easy access account offers a straightforward way of accessing your funds as and when you require them. However, there is likely to be a limit on the amount of money that can be withdrawn at any one time. Because the savings institution does not have the advantage of knowing that it will be holding the saver’s money for an extended period of time, as it does with some of the other accounts that we will examine later, the interest rates offered on easy access accounts are likely to be relatively low.
However, savers are likely to find that the easy access accounts that provide the most attractive interest rates are those that do not require an office or branch based organisation of the account. Accounts that can be run by telephone or, even more likely to attract generous interest rates, through the internet, cost the savings institutions less to administer and consequently they are willing to provide higher interest returns on savings.
Even with that advantage, however, it remains the case that Easy Access accounts are amongst the most unprofitable of savings products presently on the market. For accounts that provide a greater return the savings institutions want some guarantee about the amount and/or the length of the investment.
There are several types of accounts that savings institutions offer which provide higher interest returns on savings. These tend to be based upon the saver investing a fixed sum for a set period of time, on a fixed interest period subject to conditions or upon the saver investing a minimum regular amount into the account. The first of these that we will consider comes within the latter category and is most frequently described as a Regular Saver Account.
The Regular Saver Account
In simple terms, the Regular saver account is one into which the saver agrees to invest cash into the account on a periodic basis (conventionally this is monthly). Because the savings institution can rely upon receipt of cash on such a regular