With so many different types of savings accounts now available, it is difficult to know which one to choose. The sort of account which is best for you is dependent upon several factors – for example, whether you need instant access to your money, how long you can tie your cash up for and whether or not you pay tax.
Savings accounts most commonly fall into one of the five types of accounts detailed below:
Instant Access or Easy Access Accounts
Notice accounts generally earn a better rate of interest but require you to give a certain amount of notice before withdrawing funds to avoid any penalty. The amount of notice that needs to be given depends on which account you choose.
These accounts are becoming less attractive as instant access accounts have become more competitive and allow you to withdraw your money immediately.
Bonds or Term Accounts
For many savers, the most important aspect of any investment is knowing that their money is safe and secure. If this applies to you, then bonds or term accounts could be what you are looking for. Bonds or term accounts are high interest savings accounts which offer the most competitive interest rates but which require your money to be tied up for a specific period of time. The interest rate on most accounts is fixed from opening the account until the maturity date.
The money in the account is tied up for a specific length of time, usually between 1 to 5 years and you are not usually allowed to add further funds to your initial deposit once a bond has been opened.
Most providers do not permit any type of withdrawal before the maturity date and if withdrawals are allowed then a penalty will normally be incurred.