Finding the right place to make your savings pay is no easy feat, especially with rock bottom rates dominating the market.
Right now, there are few accounts out there that are willing to pay good rewards on your savings, unless you’re willing to lock it away for a lengthy period.
When it comes to choice, cash ISAs have long been incredibly popular – as they’re tax-free to the value £20,000.
However, new rules introduced in 2016 mean the vast majority of people can now save their money anywhere tax-free – as long as they don’t earn more than £1,000 in interest.
This means you can take your pick of easy access accounts, fixed rate bonds, cash ISAs current accounts and more – and simply follow the best rates.
One other option may be to sign up for a regular savings account, which is ideal for anyone looking to start a rainy day fund. These let you start small and get an inflation-busting return on what you do manage to build up.
A different way to make money out of your cash – the bank accounts you can actually get paid to join (and it includes free holidays)
What’s so special about regular savings accounts?
There are various perks to these accounts, aside from the fact that they pay some of the best rates around.
For a start, you can sign up with just £10 a month, but once you start, you’ll have to keep topping it up every month.
This means that by the end of the 12 month term, you’ll have a pot of money which you’ve amassed over the year.
But remember, failing to make a payment one month, could see you pay a penalty, which may defeat the point entirely.
In short, these accounts are ideal for anyone that wants to start saving, and can afford to make frequent deposits.
How much do I need to pay in?
The minimum monthly deposit will usually be of at least £10, however most accounts will let you pay in up to £500 a month.
Remember, these accounts aren’t designed for those with lump sums to save, they exist to help you get started.
How will I get paid?
When you open an account, you’ll be asked for an estimate of roughly how much you intend to deposit in each month.
Once this is agreed, all you have to do is meet the requirements to accrue interest on your savings. All payments are typically paid annually.
Just be aware that if you miss a payment and make a withdrawal (if allowed), some accounts will penalise you, ie lowering your interest pay-out.
How much interest can I earn?
The amount of interest you can earn all depends on how much you can deposit each month, and your annual savings rate.
Importantly, as money is being drip fed into these accounts month-by-month, you won’t always earn the headline rate.
“While the headline rate is 5% AER, the actual interest rate earned on the deposit over the year is approximately half as the majority of the money is deposited for less than 12 months,” explains Anna Bowes, of savings advice website, Savings Champion.
“The last premium is only going to be there for one month so you’re only receiving a proportion of that amount. If you think about it, the total amount of money isn’t there for the full 12 months.
“Overall the interest earned on £3,600 over the year is £97.50 which equates to 2.71% of the total deposit.”