Easy access, notice accounts, fixed-rate bonds: how to save like an expert

Getting your savings approach right will mean you’re better off in the long run, and have more cash to call on when needed.

The trials and tribulations of the last few years have only heightened the case for having some savings in place.

You never know what financial challenges lay around the corner, so having some money to turn to should things turn difficult is important.

However, the right way to go about handling your savings will vary depending on the stage of the savings journey you’re on.

So how can you save like an expert and make sure that you’re on the right track to end up with a decent stash of savings which you can rely on?

Manage all your savings accounts in one place with Raisin, the simple savings service

If you’re new to savings

For many of us the first challenge is just getting started with savings.

Plenty of households have very little money set aside in the first place, so building that first stack of cash is the opening step.

There are some fundamental elements to doing this successfully that you need to keep in mind.

First and foremost just leaving that money in your bank account might feel like the easiest step, but it’s likely to be a mistake.

After all, the vast majority of current accounts pay next to no interest, meaning that your hard work in saving some cash isn’t doing much good.

As a result, you need to find a new home for that money.

Now for some the first port of call will be an easy access account, and that makes sense if you are likely to need the money within a short period of time.

However, there’s a trade-off here ‒ having that access means sacrificing some returns, since the rates won’t be as good.

A smarter move is likely to make use of a regular saver. While you will have to commit to putting money aside every month, and not accessing it for 12 months, the returns on offer are much more impressive.

In fact, depending on your current account, you could pocket a rate of up to 8% from a regular saver, which will go a long way in helping you to build a decent savings balance. 

Ultimately though the biggest step in getting started with savings is actually showing some commitment and sticking with it, even if you start to feel the pinch a couple of months down the line. 

Turning saving into a habit isn’t easy, but once you get into the routine of it ‒ for example by setting up a standing order to pay a certain amount into your savings account each month ‒ you’ll soon feel the benefit.

Where to put your emergency savings

Once you are into the savings habit then you will soon have a pot of emergency savings in place.

Now you need to work out how to get the most out of the money you’ve put in that effort to save.

Again an easy access account is going to be the most straightforward option. In an emergency you’re generally going to want to get your hands on that cash swiftly, so have an account that doesn’t limit access will make sense.

However, you might be better off taking a slightly more limiting approach. With a notice account, you have to provide a certain amount of notice before you can make a withdrawal, which can be as little as 30 days.

And in return for that notice, you end up with a more attractive interest rate.

Given this, splitting your savings can mean your money gets a bigger boost.

You have a portion in easy access, ready if you need it, while the bulk of the money grows at a faster rate due to the better returns on offer from the notice account.

The bigger the notice period you’re able to deal with, the higher the rate will be too.

Another way to make use of a notice account here is by combining it with a cashback or rewards current account.

The idea here is that if and when those big emergency bills come in ‒ a new boiler say, or car repairs ‒ then you slap that spending on the credit card. 

In the meantime, you request access to your savings pot, and use that money to pay off the credit card.

The brilliant thing about this approach is that you also get to pocket the returns from the rewards card, as well as a boost to your credit score from the borrowing and paying it off, leaving you even better off overall.

Manage all your savings accounts in one place with Raisin, the simple savings service

The longer-term savings pot

Saving is a long-term effort. In fact, do it right and it’s something you’ll be working on for your entire life, and it pays to view saving in this way.

How can you get the maximum out of the money you’re sticking aside, not just today but for years to come?

Splitting your savings to meet your various needs makes a lot of sense.

That means having some money in some sort of easy access account for when life throws some challenges your way, or at least a notice account where you can cope with the level of notice needed.

You’ll also want to be making use of a regular saver so that you can continue to build the overall size of your pot in the future, since these deliver such massive interest rates by comparison with typical savings deals.

And this is where fixed-rate savings bonds can make a lot of sense.

If you already have some money ready for an emergency, then locking the rest up for a period of time is a useful ploy.

These fixed rates tend to offer improved rates ‒ the longer you fix for, the better the rate tends to be.

The term of the fixed rate that’s best for you will depend on your circumstances.

If you reckon you’re likely to want to move house in a couple of years, and would want to use that cash as a deposit, then locking the money up for five years is unlikely to be the right move.

Again splitting the money across a few different accounts over different terms can work for you here, particularly if you have concerns around future changes to interest rates. 

Adding ‘fun’ to your savings

Finally, it’s worth a word on Premium Bonds.

They are the most popular savings accounts in the UK ‒ millions of us have them ‒ but they come with the very real downside of not paying any interest.

Instead, each bond you own is entered into a monthly draw, with the potential of landing the top prize of £1 million.

Clearly, the returns you’ll get from a Premium Bond are a bit up in the air ‒ it all depends on how lucky you are, and how frequently you land prizes.

However, it’s worth pointing out that the big winners often have a decent stack of money in these bonds.

Focusing all of your savings on Premium Bonds is going to be a potentially expensive gamble.

Sure, you can get your money out pretty quickly, but it’s absolutely possible that you save your money in bonds for years and never land a prize.

However, there is something to be said for putting at least some money in them once you’re content that you have a decent emergency savings stash in place.

If you never win a prize, you haven’t given up a lot in terms of lost interest, but if you do it may turn out to have been a bigger return than a traditional account would have delivered.