Savings Accounts : What Is For Me

The previous century has seen the financial industry grow in leaps and bounds. The common man now has myriad options available for the safe keeping of his money. One needs to exercise prudence while opting for Savings Accounts such that one gets the best interest rates, while being offered the best possible category of Savings Accounts. These factors range from whether one needs to have instant access to the money to how much tax an individual pays.

Generally Savings Accounts can be classified into five broad categories

1. Easy Access/ No Notice Accounts
2. Notice Accounts
3. Bond or Term Accounts
4. Regular Savings Accounts
5. ISA and Tax free Accounts

Easy Access or Instant Access Accounts

For people who need unfettered access to their savings accounts, as many times as they wish within a stipulated time without having to pay a fine or having to serve a notice, this type of savings account is the most suitable. This serves the dual purpose of saving money while having the option to withdraw according to their wish. The only drawback in this savings account is that the interest rate offered is less in comparison to the other types of savings accounts.

Notice Accounts

These types of savings accounts are losing precedence to instant access savings accounts nowadays due to competitive interest rates offered by the banks. Although they offer better rates of interest, an account holder has to give a notice, dependent on the amount of money to be withdrawn in order to avoid a financial penalty.

Bonds or Term Accounts

This type of account is preferred by customers who wish to earn a high interest rate on their savings for a certain period of time. These accounts are created by depositing a certain amount of money that cannot be added to or withdrawn before a stipulated period. If withdrawn before this maturity period then the customer has to suffer a financial penalty.

Regular Savings Accounts

These types of savings accounts are targeted at people who deposit money at regular intervals without any urgency to withdraw it intermittently. There are also a certain fixed number of deposits and withdrawals per month. They provide superior interest rates than the other types of savings accounts and often pay an annual bonus over the payable interest.

ISA and Tax free Accounts

Residents of UK, whose income is tax payable and above the age of 16 are eligible for opening an Individual Savings Account (ISA). The individual can either choose to save in an ISA or invest in ISA equity. The returns are exempted from different taxes. There is a maximum deposit that one can make in this account, after which further deposits are not allowed but withdrawals can be frequently made. Although interest rates can be less than regular savings accounts, after tax ISA accounts are extremely sought after.