Think one-year bonds or easy access accounts are the only options if you've got a short-term savings goal? Think again! It could be time to think outside the box, because analysis from Moneyfacts reveals that savvy savers who use regular savings accounts are reaping the rewards.
Our research shows that those who use regular savings accounts for their short-term savings goals can earn far more interest than with any other standard savings account, and the difference is marked.
For example, the top fixed rate regular savings account on the market pays an impressive 6% (available through first direct for those who have a linked current account), while the top one-year bond pays just 2.06%, a measly sum by comparison.
Regular savers have been the only shining light in a market that's been decidedly disappointing of late. Average rates elsewhere have been obliterated in recent years, but regular savings accounts have remained relatively unscathed – Best Buy deals have stayed on top, and average rates have resisted a dramatic downward spiral.
The table below shows just how robust regular savings rates have been over the last two years, and as you can see, they've fared well!
So, is it time you considered them? "Regular savings accounts continue to offer great returns for downtrodden savers, paying more than any other standard savings account on the market, including long-term fixed bonds," said Rachel Springall, finance expert at Moneyfacts.co.uk.
"These deals have previously fallen out of favour due to their restrictive nature, but in recent years more flexible accounts have been launched onto the market, with many now allowing more money to be invested. For example, Kent Reliance's regular savings account, paying a top rate of 4% variable, now allows savers to put away a yearly total of £6,000 as well as make unlimited withdrawals."
Not only that, but not all regular savers will penalise you if you don't make a monthly payment. While it's always best to do so – these accounts have been designed to encourage a regular savings habit so you can build up a healthy pot by the end of the term – this means that you won't lose out should you find that your budget can't quite stretch to saving for a month or two.
In even better news, you don't always have to have another account with the same provider to get a decent rate. "While the best rates (of up to 6%) are reserved for customers who take out a linked current account, those who don't wish to switch their main bank account will still find rates of up to 4% on offer," added Rachel. "This means that they could open a high interest current account with another provider and still have the opportunity to invest in a competitive regular saver, boosting their returns considerably."
A regular savings account could be the ideal choice for those seeking to build up a savings pot, be it for a house deposit, university fees, holidays or some other large purchase. First-time buyers who are waiting for the launch of the Help to Buy ISA could benefit, too – you could take advantage of competitive deals now, and by using a regular saver, could kick-start your savings to avoid the temptation to spend money that could be earning interest. They can be the ultimate rescue from paltry savings rates and a great way to encourage the savings habit, and with careful planning, you may be able to reach your savings goals sooner than expected.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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