Find out how a regular savings account can help you get the most out of your savings.
Credit has been pretty easy to come by in recent years. That's probably why many of us don't view saving up for the things we want in quite the same way as past generations. I remember my parents telling me they patiently saved up for two years before replacing the carpets in their first home. These days I suspect most of us would chuck the cost of the carpets on a credit card and pay for it later.
And arguably there's nothing wrong with that, especially if you use a 0% credit card. That said, I think it's always a good idea to have at least some savings in reserve. You can then fall back on this sum in an emergency or if you unexpectedly lose your job.
But building up that reserve isn't always easy, particularly with so many other drains on your finances. If it's proving to be a challenge I would suggest you consider squirreling some money away regularly, even if it's just a small amount.
What's more, there are some pretty good deals out there for regular saver accounts. But, as with everything, there are one or two catches you need to look out for. You'll probably come across some attention-grabbing offers but there may be more to these than meets the eye.
For instance, Alliance & Leicester's Premier Regular Saver comes with a superb fixed rate of 12% (guaranteed for 12 months). But to be eligible you'll need to open a Premier current account at the same time. And you'll find a whole raft of accounts like this which offer table-topping rates but on closer inspection turn out to be pretty exclusive.
But don't let that put you off. Have a look at the table below which shows the most competitive accounts that don't insist on you applying for other products or having existing accounts to be eligible:
Top Six Regular Savers
Company | Account | Gross AER | Min. Monthly Deposit | Max. Monthly Deposit |
|---|---|---|---|---|
Skipton BS | Special Saver | 7.55% | £10 | £250 |
Skipton BS | Christmas Saver Issue 2 * | 7.54% | £10 | £250 |
Leek United BS | Regular Saver | 7.50% | £10 | £250 |
4Britannia BS | Fixed Rate Regular Saver Issue 2 * | 7.50% | £25 | £250 |
Abbey | Fixed Monthly Saver Issue 7 * | 7.25% | £20 | £250 |
Yorkshire BS | Regular Saver | 7.10% | £10 | £500 |
Source: Moneyfacts. *These accounts are available for a limited period and may be withdrawn at any time.
As you can see all these accounts offer impressive interest rates in excess of 7% AER which comfortably beat the most competitive ordinary savings account available at the moment. Although bear in mind there is a cap on the amount you can save.
And to get these higher rates you may find you need to make a sacrifice in terms of easy access. These accounts often take the format of a one year bond which you can't draw on, at least not without a penalty. While this is useful in removing the temptation to fritter your savings, you may need easier access than that if the account is your emergency fund.
These accounts also need regular funding, which should really encourage a disciplined savings habit. But if you don't think you can commit to monthly savings, they won't be suitable for you. If you need more flexibility then I would suggest you go for an ordinary savings account which doesn't require regular funding but which you can pay into as often as you like.
I like the Icesave Savings Account which gets good feedback, pays an attractive 6.3% interest rate and has a good guarantee. ICICI's HiSAVE Savings Account is another strong account, paying 6.41%. Its teething problems with customer service appear to have been fixed.
Neither account is as competitive as regular savings bonds but they may be more appropriate choices if you think you'll need to get your hands on the cash quickly.
And finally, don't forget about Cash ISAs. These are a brilliant way to save regularly while earning interest tax-free. You have an allowance of £3,000 to save during the tax year (rising to £3,600 from April 6th, 2008). But beware, once you have saved the full allowance, if you make any withdrawals the ISA can't be replenished until you have a new allowance available to you the following tax year.