Regular savings accounts are a popular way to accrue interest on your earnings, offering attractive rates, but often at the price of set requirements. For instance, regular savings accounts typically require a minimum pay-in amount of between £10 and £25 per-month for an entire year. Similarly, most banks usually cap the amount you can pay each month, often at £250 or £300, and penalise accountholders should they miss a payment.
The Terms of a Regular Savings Account
As mentioned, to match their attractive interest rates, a regular savings account can also present a few conditions. For instance, justifying their name, such accounts require regular monthly pay-ins and can present penalties if you fail to do so. Moreover, many accounts won’t allow you to change the amount you pay in during the term, meaning that you’ll need to decide how much you intend to save, and whether you can keep up with these payments at the time of opening. In addition, accountholders will be unable to access any money for up to a year, but some banks will permit a single penalty-free withdrawal.
It should also be noted that to qualify for certain regular savings accounts, you will also be required to open a current account with the same provider. What’s more is that certain banks will limit these current accounts to those with a subscription cost, meaning that you will need to pay a fee before you can save.
In short, regular savings accounts aren’t recommended for anyone who isn’t able to pay fixed contributions for a set period of time, for anyone with a lump sum to invest, or anyone who requires access to their savings.
Interest on Your Savings
The interest rates on regular savings accounts are often higher than other saving products, such as ISAs. Furthermore, as these types of accounts are best suited to those able to leave their savings to accrue, the interest rate will be fixed for that period. Although regular saving accounts usually reward higher amounts of interest, it is important to check the terms of your account closely, as many banks will only pay the full amount of interest on the first month’s payment. From there, the interest may drop each month until the final payment. It is also prudent to be aware that once the interest period is up, some banks will make changes to your account. For example, your savings may be moved to another account, providing a lower rate of interest, and subsequently, you may wish to move your money into another account as soon as possible.
Children’s Regular Savings Accounts
Children under 16 are also eligible for regular savings accounts, and are popular with parents wishing to teach the importance of saving money. In such case, certain providers offer family regular savings accounts, allowing children under the age of 16 to join provided that they are enrolled in full-time education.