Which savings account to choose

The main purpose of savings accounts is to offer a space where to deposit your money and earn interest. Today, there are so many options for savers that it is difficult to know which type of account suits you best. This decision often depends on personal factors, such as for how long you are willing to tie your cash, how often you will need access to your money and whether you pay taxes or not. The following paragraphs summarize the various types of savings accounts available.
Instant/Direct Access Accounts
These accounts are ideal if you need instant money to meet unexpected costs or if your are just starting to save. Often you can open the account with as little as ₤1, and have access to your money without a previous notice or penalty. They also offer the possibility of having a cash card, for you to have access to your money 24 hours a day. Although there are daily withdrawal limits on ATMs, you can take out all your money whenever you want from your local branch. Remember that transferring money by telephone or internet might take a few says.
Although instant access accounts are very flexible, they usually have lower interest rates. The best account will often be the one that pays the highest interest. Telephone and internet based accounts pay higher rates because they have lower overhead costs that allow them to do so. Ensure the highest return on your savings by
·        Comparing the products available
·        Switching accounts if necessary
·        Checking your interest rate often
Notice Accounts
With these accounts you can only withdraw by giving a notification, usually between seven and 120 days. The length varies depending on the account you choose. For example, in a 60-day notice account, you would have to inform two months prior your withdrawal. If you want instant access you will pay a penalty, which normally is the loss of interest for the period of the notice, in this case 60 days. Minimum balance requirements, limits on withdrawals and bonus rates vary according to the provider. Recently, these accounts have become less attractive given that their rates compete directly with those of instant access accounts.  
Tax Free Accounts
Individual Savings Accounts (ISA’s) work as normal savings accounts but charge no income tax on the interest earned. The amount you deposit is limited by the government. You can save up to ₤3,000 per year in mini ISA’s and from 2006 up to ₤1,000, and up to ₤7,000  in Maxi ISA’s (for more information on ISA’s click here). When the savings limit has been reached, you will not be able to invest anymore until the next tax year. They do not offer highest interest rates in the market, after taxes, the difference with other saving accounts is notorious. When evaluating the different options compare the rate offered by the ISA with the net rate (rate after taxes) offered by the common savings accounts.
Although the tax advantages are small, ISA’s are easy to open and often allow immediate access to your money. If you are not a tax payer choose the account paying the highest interest regardless. Bonds or Term Accounts
These accounts are optimal if you have spare money and can afford to tie it for a specific length of time (one to five years). Often they offer the most competitive interest rates. Once you open a bond you are no longer allowed to add more money or to withdraw. Interest rates are fixed or predetermined by the financial institution, therefore if the Bank of England’s base rate increases or decreases, the interest on your bond will not reflect these changes.
Regular Savings Accounts
These accounts require you to put into the account a set amount each month, usually not allowing initial lump sums.   Providers often impose minimum and maximum deposit limits, and more restrictions than you would usually find in other accounts.
Access to your Regular Savings Account depends on the provider; it is common to find instant, notice and fixed term accounts. The high interest rates offered often have embedded bonuses that depend on the deposit or withdrawal conditions. If not met, the interest rate will be much lower.
National Savings Accounts
The National Savings department offers a range of accounts and bonds that are low risk solutions to save your money. Because all of their products are “capital secure” or “deposit-based”, they ensure you will get the money paid in and the accumulated interest. The available options vary; while some pay tax free interest others offer fixed interest rates that are 20 per cent tax deductible. Before you decide yourself, compare National Savings with other deposit-based products offered by banks and building societies.