Savings accounts are a familiar concept to most people: you put your money into an account and receive interest, and you can leave it there until you need it.

Instant access savings accounts

An instant access savings account is the most basic type of savings account, which gives you easy access to your money, whenever you want it. You can pay in as much or as little as you want, whenever it suits you. You can also take your money out at any time without losing any interest. Plus, you can manage this type of account in a branch of your bank, over the phone or with secure online banking.

However, the flexibility of these types of accounts is offset by the lower interest rates they typically offer. Make sure you check the rate you're getting every few months and think about switching to another account if it offers a better interest rate.

If you know you'll need instant access to your money, having your savings account and current account with the same bank makes the most sense. This way, you can usually transfer money right away, especially if you're using online banking.

Fixed savings accounts

If you want to know that the interest rate you'll be getting is fixed, you might want to consider a  fixed term savings account. This type of account usually gives you a higher rate of interest than an instant access savings account. Also, with a fixed term savings account, you'll receive interest on your money at a rate that won't change for the term of your deposit.

Do bear in mind that your money will be tied up for a fixed amount of time, generally between six months and three years. And you may not be able to take any money out or pay any extra in during this period.

Still, if you're saving up for something major (like a car, your children's education or even a deposit for a house) and you have a chunk of money you don't need right now, then this could be the perfect solution for you. Tuck your money away in one of these accounts for a couple of years earn interest in the meantime, and your money will be waiting for you when you're ready to use it.

ISAs (Individual Savings Accounts)

If you're a UK taxpayer, you may want to think about opening an ISA . As a way of encouraging more people to save, the Government introduced ISAs and made any interest they earned or any return on a person's investment tax-free.

There are cash ISAs, stocks and shares ISAs and junior ISAs. Each tax year, an allowance is set for the total amount you can save with each type tax free. It's in your interest to make the most of the allowance. Otherwise, you'll lose it and you won't be able to carry it over to the following year.

The ISA allowance for the 2018/2019 tax year is £15,240.

Be aware that once you've deposited the maximum amount allowed into your ISA , you can't add any more even if you take money out. So you should consider having other savings available if you think you'll be saving the maximum during the tax year.

When comparing interest rates on ISAs and other savings accounts, remember that you won't pay tax on the interest earned on an ISA .

The tax-free rate is the contractual rate of interest payable where interest is exempt from income tax.

The favourable tax treatment for ISAs depends on your individual circumstances and may vary in the future.



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