A savings account can help you grow your savings. Keep reading to find out more about this type of bank account, how is it different from a current account, some benefits of this bank account and its types.
While there are various ways you can grow your money, a savings bank account is often the first step towards helping you grow your money risk-free. Let’s delve deeper into this to understand better.
What is a Savings Account?
A savings account is a type of bank account that allows you to earn interest on your deposits. It helps you grow your savings while giving you access to your money, depending on the type of account you select.
How is it Different from a Current Account?
While a current account does not offer any interest on your deposits, a savings bank account allows you to earn a fixed or variable rate of interest on your deposits. On the flip side, a current account allows you to withdraw funds from your account without any limitations; there may be some limitations on the withdrawal of funds from a savings bank account.
Benefits of Savings Account
A savings bank account offers various benefits, such as;
- It helps you earn interest on the deposits.
- It helps you grow your savings with no risk.
- It helps you save tax under the Personal Savings Allowance (PSA) and ISA.
- It offers you the flexibility to earn higher interest for fixed-term deposits and bonds.
Who Can Open a Savings Account?
To open a savings account, you must be;
- 18 years or older
- A resident of the UK
When opening the account, you may be asked for some documents, which could vary depending on the bank you select. However, you will typically need to show;
- Proof of Identity: A valid document that testifies your photo, name, signature, age, etc.
- Proof of Address: A valid document that testifies your current and permanent resident address.
Some accounts may also require you to have a current account in your name to open the account. Do check with your bank for the list of accepted documents and eligibility criteria.
Different types of Savings Account
There are many types of savings account that you can choose from. Some of the most prominent ones are;
- Easy Access Savings Account: These accounts allow you easy access to money withdrawals without much limitations or penalties. However, the interest rate usually offered is the lowest.
- High-interest Savings account: These accounts offer a slightly higher interest rate but may come with some restrictions on the withdrawals.
- Notice Savings Account: These accounts offer a high-interest rate. While you can make withdrawals without any penalties or restrictions, you have to notify the banks (usually ranging between 45-100 days) before withdrawing your money.
- Fixed-Rate Term Deposits and Bonds: These accounts help you deposit your savings for a fixed term, usually ranging between 6-months to 5 years, and offer one of the highest interest rates. However, you cannot make withdrawals before maturity and doing so may attract a penalty or loss of interest.
Open a Savings Account and Grow Your Savings
While there are various types of savings account and many banks to choose from, make sure you opt for the right one and a credible bank that aligns with your banking needs. Lastly, ensure the bank you select is authorised by the FSCS, which ensures your deposits up to £85,000. Open a new account today and start growing your savings.