Savings accounts: how to choose what’s best for you

If you’re squirrelling away some cash, it’s good to know your options

Person holding jar of coins
A savings account can help build a rainy-day fund or reach your financial goals
(Image credit: Peter Dazeley/Getty Images)

In partnership with MoneyWeek

What’s the best way to save some money for a rainy day, or to put towards a financial goal? You could put your stash in your current account, but a savings account can help you earn better returns.

And now might be a good time to open one, as recent interest rate rises by the Bank of England have nudged banks to improve the returns offered on their savings accounts.

Savings rates are starting to “hot up after years of low returns”, said personal finance correspondent Kevin Peachey at BBC News.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.


Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

Types of savings accounts range, and there are a few factors to consider when choosing one, explained MoneySuperMarket, “such as how much return you’ll get and how long it will take to access your cash”. Much of this will depend on your savings goal, the comparison website added. Here is a comprehensive rundown of the types of savings accounts on offer.

Easy access accounts

Easy access accounts give savers the flexibility to withdraw cash whenever they want without losing any interest. The downside with this option is you won’t see the biggest returns.

It’s best to use an easy access savings account as an emergency fund, said financial advice website, “where you’re more concerned about accessibility than interest rates”.

Savings offers from our financial partners

  • Brown Shipley, 2.82% AER on £1,000 to £85,000, easy access. Withdrawals and deposits allowed (minimum transaction £500 and balance must remain between £1,000 to £85,000)
  • Ahli United Bank, 4.2% AER on £1,000 to £85,000, fixed for one year. No withdrawals allowed during fixed term. Interest paid after 12 months
  • Starling Bank, 3.25% AER on £2,000 to £1m, fixed for one year. No withdrawals allowed during fixed term. Interest paid after 12 months
  • First Direct, 7% on up to £300 per month, fixed for one year, paid after one year. Making a withdrawal will result in less interest being paid. Must also open a First Direct current account (new customers qualify for £175 switching bonus).

Rates retrieved on 16 February 2023. When you apply via links on our site, we may earn an affiliate commission. Rates retrieved on 16 February 2023

Notice accounts

A notice account is similar to an easy access account, but rather than having instant access to your money, you will have to wait a set period – usually between 30 and 180 days – before your withdrawal goes through. There may also be a limited number of times you can withdraw during the year.

This is a good option “if you don’t anticipate you’ll need the amount you’re saving urgently and want higher interest rates but don’t want to pay a penalty for choosing to withdraw”, explained

Fixed rate accounts

A fixed rate account may be worth considering if you are happy to lock up a chunk of your savings for a longer stretch of time.

Interest rates are typically higher with these accounts than with easy access accounts, but there is no “easy escape” from a fixed rate savings deal, said Ed Magnus at, “as typically no withdrawals are permitted before the end date”. Some providers make it clear that access will only be granted in exceptional circumstances, the website added. You may lose earned interest if you want your funds before the product matures.

It can be hard to find a fixed rate savings account that beats or even matches inflation, especially with the rising cost of living. This means the “buying power of your money is reduced”, said MoneyHelper. Alternatively, investing in funds or through shares on the stock market tends to “do better than cash over the long-term, providing an opportunity for greater returns on any money invested over time”, said the site. But it warned that “there’s always the risk that your investments can go down as well as up”.

Regular savings accounts

A regular savings account lets savers earn interest by making regular monthly contributions. These types of accounts tend to pay the highest rates of interest compared to other cash savings accounts, but there are “certain restrictions involved”, said Moneyfacts.

There may be a minimum amount you have to contribute each month, as well as a cap. “Some will penalise you for missing a monthly payment and may not let you access your money until the end of the term,” the financial website added.

Individual savings accounts (Isas)

Individual savings accounts, or Isas, “can bring large tax benefits, especially for higher earners”, said MoneyWeek. But their rules can be somewhat complicated. Savers are allowed to put up to £20,000 into an Isa per year without paying income tax on any returns. You can withdraw money at any time without paying tax. While Isas aren’t an investment, per se, they are the “‘wrapper’ that goes around your savings and investments to protect them from the taxman”, MoneyWeek explained.

A savings account may be beneficial for short-term goals, said NerdWallet, as you are unlikely to exceed the personal savings allowance. But an Isa could be better for larger amounts as “you never have to worry about your interest exceeding the personal savings allowance”, it added. “It will always be tax-free.”

Whichever savings account you go for, generally, “the longer you lock your money away, the higher the rate you can get”, said Shares Magazine.

This article is based on information first published on The Week's sister site,

Continue reading for free

We hope you're enjoying The Week's refreshingly open-minded journalism.

Subscribed to The Week? Register your account with the same email as your subscription.

Marc Shoffman is an NCTJ-qualified award-winning freelance journalist, specialising in business, property and personal finance. He has a BA in multimedia journalism from Bournemouth University and a master’s in financial journalism from City University, London. His career began at FT Business trade publication Financial Adviser, during the 2008 banking crash. In 2013, he moved to MailOnline’s personal finance section This is Money, where he covered topics ranging from mortgages and pensions to investments and even a bit of Bitcoin. Since going freelance in 2016, his work has appeared in MoneyWeek, The Times, The Mail on Sunday and on the i news site.