Buying a house, going on holiday and having a rainy day fund are the top reasons why people in the UK are saving, according to the NatWest Savings Index.
Saving for a house is the most popular reason why people in the UK are saving, with one in four stating this was the reason for putting money aside. The second most popular reason was to go on holiday, with one in five saving for this reason, while one in seven were saving for a rainy day.
Those living in different areas of the UK are saving for different reasons. The most popular reason to save for those living in London, the south east, east of England, east midlands, west midlands and south west was to save for a home. While saving for a holiday was the most popular reason for those living in Yorkshire and The Humber, north east, Scotland, Northern Ireland, north west and Wales.
Those looking to save for a home and wanting to do so using Help to Buy ISA have until the end of November 2019 to open an account. If an account is opened before this date, savers can continue paying into their account until 30 November 2029 and benefit from the 25% Government bonus, as long as the bonus is claimed before 1 December 2030. It is important to note that with the Help to Buy ISA, a maximum of £200 is allowed to be deposited into the ISA each month, although an additional £1,000 can be paid in the first month the account is open. The account currently topping our Help to Buy ISA chart with no opening restrictions is Tipton & Coseley Building Society’s Help to Buy: ISA paying 2.60% on a minimum opening deposit of £10. Savers should be aware that this account doesn’t allow transfers in from other ISAs.
Alternatively, savers can choose to save using a Lifetime ISA, which also offers a 25% Government bonus for those using the money to buy their first home, however this account can only be opened by those below the age of 40, but money can continue being added to the account until the saver reaches the age of 50. Moneybox is currently topping our Lifetime ISA chart with its Moneybox Cash Lifetime ISA offering a rate of 1.40% on a minimum opening deposit of £1. To make withdrawals from this ISA prior to age 50 for any reason other than as a deposit for a first house, there is a penalty of a 25% charge.
While the Help to Buy ISA is offering a higher interest rate than the Lifetime ISA, when deciding on which is the best option, savers should take a number of factors into consideration and not simply look at the rate. For example, a Help to Buy ISA only allows savers to pay in a maximum of £200 per month, which adds up to £2,400 a year, while the Lifetime ISA allows savings to deposit up to £4,000 a year. In addition to this, the Help to Buy ISA adds the Government bonus of 25% onto the final amount within the account at the time of the purchase of the property, however the Lifetime ISA adds the bonus on to the account monthly, which means that savers could get more interest with a Lifetime ISA depending on how much they deposit into the account and for how long. Saying this, the withdrawal restrictions on Lifetime ISAs are stricter than those on Help to Buy ISAs. To compare the two options more thoroughly, read our guide Help to Buy ISA versus Lifetime ISA.
For those looking to save for a holiday, a regular savings account is often a good option as it commits savers to deposit each month into the account, allowing them to build up a substantial amount over the term of the account. The account offering the best rate in our Regular Savings chart without any opening restrictions and on a 12-month term is Kent Reliance’s 1 Year Regular Savings – Issue 3, which pays 3.00% on a minimum deposit of £25. This account allows savers to pay a minimum monthly deposit of £1 to a maximum of £500 and if a payment is missed the account is closed and the funds are transferred to an easy access savings account.
Those putting money aside to save for a rainy day can currently get some highly competitive rates with an easy access savings account, which will allow savers to gain quick access to their money. The top rate in our easy access savings account chart is 1.50%, which is being offered by Marcus by Goldman Sachs® and Virgin Money. Online Savings Account by Marcus by Goldman Sachs® includes a 0.15% bonus for 12 months and allows unlimited further additions and withdrawals. Meanwhile, Virgin Money offers the top rate of 1.50% on both its Double Take E-Saver Issue 10 and Man Utd Double Take E-Saver Issue 5 – both these accounts allow unlimited further additions but restrict withdrawals to two per year including closure.
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