How to Match Your Savings to Your Financial Goals

The best savings account is one that matches both the money you need and when you need it. Easy access accounts give you flexibility when you need it, whereas fixed rate bonds may only work if you’re happy to leave your money untouched for the agreed term. A Cash ISA may also be worth exploring if tax-free interest is important to you.

Start with your reason for saving!

Before you start the process of comparing interest rates, consider what it is you’re saving for. Someone who wants an emergency fund will usually have different expectations and priorities to someone who is saving for a holiday, a car, wedding or a house deposit. A savings goal will give your money a real purpose and will make it easier for you to decide which option is most suited to your needs. Deciding how to save money and the length of term you want to commit your money to is important to consider when choosing the best savings account for you.

This will help you divide your financial goals into short, medium and long term. Savings for an expense next year might not need immediate access, whilst money that can be set aside for a later goal could potentially be committed for a longer term.

When will you need the Money?

The biggest difference between the available accounts is access: an easy access savings account may well be suitable when it’s an emergency fund or you want access to withdraw your funds when convenient, and without giving notice.

A limited access account could provide a compromise; it will allow for a set number of opportunities to make a withdrawal during the term, which could give you some flexibility whilst discouraging frequent withdrawals. Another option could be a notice account, where you lock your funds away, but you can give notice of a certain amount of time before you make a withdrawal.

If you’re confident that you have long-term savings goals and will not require immediate or short-term access to your funds, a fixed rate bond may be worth considering. The interest rate is fixed for the agreed term; this will give you certainty about the interest rate your savings will earn. However, access is usually restricted, and you will be unable to withdraw your money before the bond matures.

Consider whether a Cash ISA is suitable.

A Cash ISA is a savings account that pays interest free of UK Income Tax (subject to ISA regulations and your available annual allowance).

Cash ISAs are available with easy access or fixed terms, but essentially the same questions apply: Do you require access to your funds? How long are you prepared to commit your money?

Beyond the headline interest rate

A competitive interest rate is important, but it's only part of the equation. Compare the Annual Equivalent Rate (AER), which will show you what the interest rate would be if interest were paid and compounded once a year. Then consider the more practical details;

• Minimum opening deposit
• Are additional deposits allowed
• When interest is paid
• How withdrawals work
• Can the account be managed online, by post or in branch

The account offering the highest rate may not be the most suitable account for you and your savings goal, especially if its terms and conditions don’t fit your plans. An account with a lower rate of interest may well offer the access and option of managing the savings that you need.

Could more than one savings account help?

You do not necessarily have to place all your savings in one account. Often people keep an emergency fund in easy access savings and use a notice or limited access account for medium-term plans or invest in a fixed rate bond. This approach will separate your financial goals and reduce any temptation to spend money intended for other purposes.

Making your choice – How to save money!

The best savings account is not solely the one with the longest term or the highest interest rate. It is the account that meets your requirements and what you want the money to achieve. Start by identifying your financial goals, identifying when or if you require access, and then only commit money for a longer term or fixed period when you’re sure that you can leave the funds untouched.

Kent Reliance offers a range of savings options, including easy access, limited access, notice accounts, fixed rate bonds and Cash ISAs. Product availability and terms can change, so please read the current product summary and terms and conditions carefully before applying.

Frequently asked questions

Which type of savings account is best?

There is no one-size-fits-all account that is best for everyone. The most suitable option will depend on your financial goals, timescale, need for access, balance and the account conditions.

Can I have more than one savings account?

Yes. Using different accounts for different saving goals can often help you balance accessibility and longer-term saving.

Should I always choose the highest interest rate?

Not necessarily, it's important to compare the interest rate with the terms and conditions of the account. You should compare the rate with accessibility, minimum balance, deposit restrictions, interest payments and how the account will be managed.

What does AER mean?

AER stands for Annual Equivalent Rate. It identifies what the interest rate would be for any account if interest were paid and compounded once each year; this helps you compare all your options more consistently.

Are my savings protected?

Deposits with a UK bank are protected by the Financial Services Compensation Scheme (FSCS), subject to its current regulations.

Next steps

Explore the current Kent Reliance savings range and compare the features that matter most to you;

Compare all savings accounts

View Easy Access Savings Accounts

View Fixed Rate Bonds

View Cash ISAs

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