Savings Interest Rates

When looking for the best savings account it is not just a case of looking for the best interest rates. There are many different types of accounts and there are plenty of things to consider before choosing the one which suits you best.

Instant Access – The most popular type of savings account and gives access to your money straight away. Most of the time you are allowed to put money in when you like and take money out when you like. The flexibility of this type of account is its greatest benefit. The interest rate however will reflect this with most companies offering some of the lowest rates available. It is the best savings account if you are keeping money or building money up in the short term.

Notice Saver – This type of savings account requires you to give notice for any withdrawals that you are likely to make. Usually the terms of notice are 30, 60 or 90 days. Most of the notice account available allow you to make deposits whenever you like. The interest rates are usually slightly better than instant access. This is the best savings account if you are saving for planned holidays or car upgrades etc.

Monthly Saver – The monthly saver account allows you to save monthly amounts usually set for a certain period of time. These monthly amounts will be restricted to a certain amount but offer some of the best interest rates that you can get. Some companies will restrict access to any funds accumulated and some you will be able to withdraw whenever you like. It is the best savings account if you have surplus income and want a decent return at the end of the term.

Bonus Saver – The bonus saver will reward you for either not making any withdrawals or making fewer than a set limit of withdrawals in a year. This bonus is usually in the form of extra percentage on the interest rate applied after the specified period. Adding money to the account can sometimes be possible. This is the best savings account if you think that you will not need your money for a period of time but can in case of an emergency.

Bond – The bonds on offer by most companies usually range anywhere from 6 months to 5 years in duration and most of the time the longer the term, the higher the interest rate. The interest rate will be fixed so that you know exactly what return you will be receiving after this term. The funds are not accessible during this time making this the best savings account if you have a lump sum of money that you want to make the best possible return on and definitely do not need to access the money.

Best Savings Rates

Most people, especially in today’s financial climate, are looking for the best savings rates they get. Or more importantly the best return they can get on their money. But how and where do you find the best savings rates?

You can shop around at all the banks and financial institutions and be given a wide range of choices. Lots of different types of accounts, varying interest rates, all sorts of terms, conditions and notice periods. Also things do not stay the same for very long with companies changing there minds from one month to the next.

The key to getting the best savings rates and best returns is by diversifying. Essentially meaning not putting all your money in to one type of account at the same interest rates. They idea is to try thinking about your money over a time period, short term, medium term and long term.

Short term – This would include money you would want to get access to if you needed it quickly in an emergency should you need it. Or for any planned expenditure over the next 6 to 12 months. The reason for this would be because these types of accounts do not offer the best savings rates and therefore not a fantastic return.

Medium term – The medium term would be classed as the next 1 to 3 years. If you knew you could be moving after that time or buying a new car, paying for a wedding etc, you could essentially make sure this money was put into something you couldn’t touch for that period of time. This will then make sure that you get the best savings rates that you can seeing as you do not need the money.

Long term – After looking at what you would need in the short and medium term, anything else can be used here to maximise returns. Looking at options for over 3 years will potentially provide better returns in the long run depending on what options you take.

Looking at stocks and share or other types of longer term investment has it’s risks, but there are investments which can guarantee your starting amount as long as you run the full duration of the investment. The stock market has over time, always shown growth over a longer period. Yes their maybe times were the values crash and investment value is lost, but recovery has always happened and allows for substantial gains therefore making it worthwhile. The returns of good investments have always outperformed short and medium term savings interest rates.

Other long term investments could be in property or even things like gold, if stocks and shares are not your preference. Whatever your decision though you should think about the longer term if you are looking for real growth for your money and not just the best savings rates in the short or even medium term.

Protect Your Savings Interest Rates

There is a common trend in the banks at the moment which has to do with savings accounts and savings interest rates. If you keep your savings with the same bank in the same account for a number of years, you would expect your bank to look after you. But they do not and actually take advantage of this.

The banks release a savings account. They advertise it, use it to attract new customers or convince existing customers to transfer their savings to them. The customers, being quite happy with the rates and the terms, forget about their savings interest rates knowing that they have the return that they expected.

Then after 6 months to a year the bank get bored of that savings account and decide on the next big marketing push and release another type of savings account. The terms maybe a little different. The savings interest rates is usually different. And the same thing happens again, attracting new customers etc.

But what happens to the old savings account?

Well at first the savings interest rates stay much the same. But gradually over the next year or so they reduce the rates so that in the end the rates offered are much the same as being offered on a current account. Near to 0% in most cases. And unless you make steps to review your savings interest rates with the bank, they will let your interest decrease and will not tell you about it.

It has been my experience that working in the bank that if I see a customer has an old savings account, where the rate has dwindled away, that I make a point of telling them. At worst I will make sure that they are upgraded to the most recent form of savings account that I can to provide them with the most interest.

I can tell you though, that not all of my collegues do the same, nor are they encouraged to do so by their superiors. Upon the release of a recent new Cash ISA savings account, we were actually instructed not to upgrade customers from the old Cash ISA accounts, to the new one unless the customer actually asked us.

The reason for this is clear. The bank takes advantage of their position of holding your money. They take your money which they make a profit on anyway. Then they pay you less and less interest over time so that they actually make more and more profit on. How is that for your continued loyalty!

My advice is to review your savings interest rates with your bank every 12 months. Before you go into a conversation with them, make sure you know exactly what rates they would offer if you are a new customer. Then also find out what the nearest competitor is offering so that if they do not offer thier best possible option, you have another choice of where to make the most of your money.