savings

choosing a savings account

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So, millionster asked me which savings account I recommended. I don’t really make recommendations, but I can tell you how I go about choosing a savings account.

First of all, you need to think about the purpose of the account, this will help you determine what sort of restrictions you can have on it. Key questions to ask yourself are:

• When will I definitely need to access this account?
• How far in advance will I know I need to withdraw money?
• Do I have a lump sum already, or will I be making regular payments?

Now you need to think about yourself. Are you happy to access money by post, in branch, over the phone, on the web? Do you need more restricted access to prevent you spending it accidentally? How does this compare to your need for access to the money when it is to be spent? Does it have to be with a bank or building society that you have already heard of?

Once you have determined your restrictions, I find that the best source of the highest paying interest account is money saving expert. At the time of writing this, they and Moneysupermarket say that the best options are:

• money tied up for a year, web-based Birmingham Midshires 11 month internet fixed rate bond
• £500 or more, tied up for a year, postal or telephone Anglo Irish Bank Fixed Rate Bond
• £1 or more, tied up for a year, postal or telephone, Derbyshire Building Society 1 Year Fixed Rate Bond
• £25 to £50 per month, regular saver, Lloyds TSB Monthly Saver
• £1 or more, no tie ups, web-based, ICICI Bank HiSave Account
• £1000 or more, no tie ups, phone or postal, Alliance and Leicester Direct Saver
• £1 or more, no tie ups, phone or postal, Anglo Irish Bank Easy Access
• £1000 or more, phone, postal or branch based, West Bromwich Building Society Premier Bonus Tracker 2
• £500 or more, branch based Post Office Instant Saver
• £250 or more Chelsea Building Society Bonus Savings
• £1 or more, Bank of Scotland Instant Access Savings Account

The interest rate on the regular saver account is 8%, and on the others, its between 5.75% and 6.9%.
Note that for the purposes of this discussion, I’ve assumed that a mini cash ISA isn’t suitable because you already have one. You can do the same sort of analysis to pick the best mini cash ISA, as long as you remember to obey the tax rules.

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