Absolute newbie at savings, I don't need instant access hut don't want a bond, help?

AndiW_2

I want to get the best possible rate but don't want to put my money away for years. I have never had a savings accout before and at the moment I have £500 to put away and can afford about £200-£250 a month to be added to it.

As a ln absolute newbie i have afew very basic questions I am unsure of aswell:

• can interest be put into the account monthly in some accounts?
• do accounts that give 0% intrest for the months you withdraw offer better intrest than others?
• what is a good rate of intrest?

Sorry for these basic questions.
Thanks very much in advance.

Stochasticity

AndiW wrote: »

I want to get the best possible rate but don't want to put my money away for years. I have never had a savings accout before and at the moment I have £500 to put away and can afford about £200-£250 a month to be added to it.

As a ln absolute newbie i have afew very basic questions I am unsure of aswell:

• can interest be put into the account monthly in some accounts?
• do accounts that give 0% intrest for the months you withdraw offer better intrest than others?
• what is a good rate of intrest?

Sorry for these basic questions.
Thanks very much in advance.

A good rate of interest is 3% and upwards at the moment. I wouldn't consider a savings account paying less than that myself, especially with inflation at the moment in the region of 4-5%.

Assuming you are a basic rate taxpayer, then your first port of call generally should be an Individual Savings Account (ISA), in which the interest that you earn will not be taxed as income. Outside of an ISA, your savings interest will be taxed at the same marginal rate as your income (20% for basic rate taxpayers, 40% for higher rate etc). An account paying 3% gross only pays 2.4% net of basic rate tax.

http://www.moneysavingexpert.com/savings/best-cash-isa

http://www.moneysavingexpert.com/savings/savings-accounts-best-interest

That said, in your specific situation looking to save a regular amount per month, a Regular Savings account might also be a good alternative (or complement) to an ISA.

http://www.moneysavingexpert.com/savings/best-regular-savings-accounts

Hope these links help. On to your other specific questions...

Many accounts allow for the payment of interest on a monthly basis, yes, though others are paid on an annual basis, on the anniversary of account opening, or upon maturity. You will have to check exactly what each account offers.

Generally accounts with withdrawal restrictions pay slightly more than accounts with instant access, but the main way that banks structure things these days is through fixed term bonds (where you lose access to your money for years at a time) rather than through short-term notice accounts (where you have to notify them a certain number of days before making a withdrawal) or accounts that pay a higher rate in months in which you don't make a withdrawal. You can get just as good a rate (around 3%) on an instant access account these days as you can on a notice account.