All savings accounts are designed to help you save for the future. However, for someone just starting out, the choice of savings accounts can be dizzying!
The simplest account to open and understand is a basic easy access savings account. We’ve given a quick overview below of this and the main types of savings account:
Easy access accounts – Allow you to access your savings when you need to (although some easy access accounts now have restrictions on withdrawing your money), and you’ll earn some interest on what you save. A great all-rounder type of savings account.
Fixed rate bonds – Offer a better rate of interest, but you typically won’t be able to touch your cash or make any further deposits for a set period – normally between one and five years.
Notice accounts – Again, offering a better rate of interest than an easy access account, but you must give a set amount of notice if you intend to withdraw any cash. The notice period is usually between 30 to 180 days. If you don’t give the required notice, then you will often be penalised by losing interest.
Regular savings accounts – With these, you must commit to making regular payments into your savings for a set period. While you get a better rate of interest, you must pay in either a set amount or any amount between the account’s minimum and maximum monthly deposit. Withdrawals are often limited too.
Monthly interest accounts – Pays interest every month. Ideal for people who are looking to generate a regular income and have a large lump sum to deposit.
ISAs (Individual Savings Accounts) – A specialised type of tax-free savings account available to UK residents over the age of 16. See out guide to ISAs for more details.
Joint savings accounts – Many types of savings account can be opened in more than one name. Very often, these are used as a place for you and your partner to save for a rainy day. These can be set up so that either one of the account holders can operate the account (withdraw cash or transfer funds, etc.) although you can set up a joint account that needs both parties to authorise any transactions.
The good news is that whichever one you choose, opening a savings account is pretty much the same process. However, there are several ways you can open a new savings or joint account. Not all of these may be available depending on the account and the provider so check to make sure. These are:
In branch – Most providers still have high street branches where you can walk in and do your banking.
Online – Nowadays, it’s a simple matter to open a new account via the internet – and has the added benefit of enabling you to bank outside of normal opening hours.
By post – It’s perfectly possible to not only open but also manage some accounts by post.
By phone – Telephone banking is well established in the UK and enables you to check your balance or carry out other transactions 24 hours a day.
Smartphone app – The rise of smartphones means you can now open and manage a wide range of accounts in this manner.
Regardless of how you open your new savings account, there will be some elements that all share. These are:
Personal details – All savings accounts will require you to complete an application form. Whether you fill this in yourself in branch or online, or someone else does it for you over the telephone, you’ll be asked to provide details of the following:
Proof of ID and address – Unless you already have an account with the account provider, you may be asked to supply both proof of your ID and current address. This can be in the form of a passport, a driving licence and/or household utility bills (that have your name and address on). Online accounts will do this electronically but what is required and what they are prepared to accept are individual to each bank or building society.
The bank will ask to see originals only (so no photocopies). These will be returned to you after they have been examined.
Some people may have trouble with supplying the documentary evidence that banks normally require to validate your ID and/or where you currently live.
In such circumstances, you may be able to open a basic savings account instead. Full details of how to do this can be found in our guide: Can you open an account without proof of address?
Joint savings accounts are opened and operated in much the same way as an account with only a single account holder.
Nearly all the various forms of savings account listed above can be jointly opened and operated. Some may have restrictions requiring you to open an account as a single account holder and then have an additional account holder added, although these are fortunately rare.
Opening any kind of account with another person should be taken seriously, so before you rush in, stop and think for a moment about how things will work. By opening an account with another person, you should be sure that they will operate it in a way that you agree with.
For example, if you both have the same access to the joint account, they will be able to deposit and withdraw funds without consulting you. As such, you need to have complete trust in your joint account partner. If you are at all hesitant about the other joint account holder acting in a responsible way, then you might be best advised to keep your accounts separate.
Alternatively, you could safeguard your own finances by retaining your own personal account and simply deposit a regular sum from this to your joint savings account.
Many joint savings accounts can be set up in such a way that both of you need to authorise any transactions – meaning you both need to agree before any withdrawals or similar transactions can be made.
Be aware that opening a joint account with someone also has repercussions for your credit rating. If their credit rating is not so good , you may find your own creditworthiness is downgraded (and vice-versa ).
Read our guide Are you in the dark about your partner’s finance? to find out what you should be discussing with your partner.
Just as with other savings accounts, both parties will also need to provide all the information required by the bank, along with proof of ID and address for each account holder.
By the way, it’s perfectly possible to open a joint account if you live at separate addresses, which can be handy if you aren’t living with the other account holder.
While it’s easy to open a new savings account, most people tend to stick with the same savings account for years – even in face of being able to get a better interest rate elsewhere! So, take your time choosing which is right for you.
Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.