If you are looking to build up a nest egg, do not just plump for the first savings account you find, as accounts vary widely in terms of their offerings.
Moneysupermarket.com reports that when choosing which savings account to go for, you need to think carefully about whether you will need access to your money; how long you are looking to save; and how you want to operate it. For example, do you do all your banking online, or do you like being able to pop into a bank branch and talk to someone face-to-face?
Here are what you should watch out for, so that you can find the right savings account to suit your requirements:
Easy access accounts: If you want to build up a rainy day fund, which you can access whenever you need to, you will need an easy access account.
However, do not assume that just because an account is marketed as easy access, you will be able to make withdrawals whenever you want to. You may only be able to make a set number of withdrawals a year, so always read the small print carefully before applying.
Notice accounts: If having immediate access to your savings is not top on your priority list, you can consider a notice savings account instead.
This type of account requires savers to let the provider know in advance that they want to make a withdrawal. Typically, notice periods start from 30 days, but can be as long as 120 days or more.
Beware the bonus trap: If you are opening a savings account, you are going to earn the most competitive savings rate possible; but watch out for short-term bonuses, which disappear after the first year.
Many savings providers offer accounts promising bumper returns, but only for the short term. There is nothing wrong with going for an account with a bonus, but make sure you make a note of when the bonus disappears and move your money then, otherwise you could end up earning paltry returns.
A fixed rate account: Some savings accounts, usually known as fixed rate bonds, pay a fixed rate on return for a set period of time. Accounts typically have a one-year term, but you can lock up your savings for as long as five years. And, as you would expect, the highest rates tend to go to savers who are prepared to tie up their cash for the longest period.