Am I better off saving with a building society rather than a bank..advice?

Jlawson118

I'm 20 in a few months, and all throughout my life I've been encouraged to save my money. My grandma has held a savings account for me with Leeds Building Society for a long time, and there's a few thousand in there. I don't really want to withdraw this even though she'd let me have it whenever.
Anyway, I opened up my first current account and savings with my own access just short of three years ago with HSBC, but things didn't really work out with them and I went with First Direct in which I have a Cash ISA earning 1.3% interest, a bonus savings account in which I'm not sure on the interest rate of that one, but it encourages me not to withdraw from it otherwise I lose interest, and then just a regular savings account.

I opened a Lloyds account last year as well as a savings, but the savings account was 0.5% interest, and yesterday marked the first year I've had it open where it's dropped to 0.25% now and I can remember them telling me that. I don't use that account for my savings as such though. I use it for short term.

Anyway, we had a talk in university a few months ago from a guy who worked high up in Yorkshire Building Society and I remember him saying that building societies work a lot nicer than banks do in term of saving. And I do want something that I can put money in, earn interest on but I can withdraw if ever I wanted access to it..

I'm wondering what I would be better off doing?

molerat

You are better off saving wherever has the highest interest rate. The guy from the BS - well - was talking BS. They are just after your money the same as all the others.

Current accounts pay the highest interest at the moment. Some require minimum pay ins and direct debits but there are still some "clean" ones that pay a decent rate with no requirements.

Cornucopia

The best cash savings deals at the moment are on current accounts with specific institutions (mostly banks).

Have a look at TSB, Santander et al.

colsten

https://forums.moneysavingexpert.com/discussion/5374614

Jlawson118

You're totally right! In all fairness, I didn't really like the guy or take much of an interest in his speech anyway. His speech was regarding more the technical side of it rather than what they do, but he just showed some video about how building societies earn money from their customer's investments, and mentioned that banks are just daylight robbers, in which I'd heard things like that before..

Anyway, I've seen recent current account offers but the only ones I've seen are ones where you have to pay in so much a month, but unfortunately I can't guarantee that at the moment because I don't have a job yet. I'm looking but I only ever really get my student loan payments and the odd money from family or odd jobs. I'm definitely going to start looking around though! I wanted to upgrade my Lloyds account to Club Lloyds for their 1% - 4% rate, but I need to pay in at least 1500 each month in which I can't really afford to do. Otherwise there is a five pound monthly fee in which I can't really afford to be doing that. I'd be losing money rather than earning it..

I am also opening up a Halifax account that pays five pounds every month providing I have two direct debits and pay in 750 each month. I think I can generally afford that, and in a way I guess I'm earning some kind of interest by banking with them..

YorkshireBoy

Excluding that money tied up in the FD regular saver, how much cash do you have in total at the moment?

Cornucopia

You don't need to transfer in £x per month and leave it there. You just need it to arrive. Once it's there, you can do what you like with it, including send it back from where it came.

If you have several £1000s in lower rate savings elsewhere, then this is well worth looking into, especially with the new £1000 tax free savings interest limit.

Eco_Miser

Jlawson118 wrote: »

Anyway, I've seen recent current account offers but the only ones I've seen are ones where you have to pay in so much a month, but unfortunately I can't guarantee that at the moment because I don't have a job yet.
...
I wanted to upgrade my Lloyds account to Club Lloyds for their 1% - 4% rate, but I need to pay in at least 1500 each month in which I can't really afford to do.

You need to have £4000 sitting there before Club Lloyds is worthwhile. Just move less than half of that to your Halifax account and back again on the same day: both accounts pay-in requirements met.
Alternatively, just for illustration, you could move £50 back and forth every day.

If you want to use a building society, Nationwide do 5% current account and regular saver.

LXdaddy

Basically, financial institutions do not exist for the good of human kind.


They are there to make returns for their shareholders (or in some limited cases their members) Almost all financial institutions are companies rather than societies these days. Nothing wrong with that but it is the world that we live in.


As a saver, the "best" institution to do business with is the one that gives you the best return - so that's one that pays the highest interest on the amount of money that you have.


In the present market, the highest (guaranteed) interest rates are in current accounts and regular savings accounts. So called "savings" accounts are easily beaten.


There are multiple threads here about using the interest paying current accounts but you will find
Lloyds
TSB
Nationwide
Santander
Bank of Scotland
offering rates between 5% and 3% on current accounts


Yes generally these require a minimum pay in per month. Even MSE articles translate this into an annual salary requirement. That is absolutely not required. All that is needed is for the minimum amount to appear as deposits during the month. You can even transfer the amount out of the account to another institution and then transfer it back in to satisfy the requirement.


They also usually require direct debits to be setup on the account but again these are easily achieved even if you don't pay bills like council tax or utilities. Lots of threads here about that too.

dunstonh

Anyway, we had a talk in university a few months ago from a guy who worked high up in Yorkshire Building Society and I remember him saying that building societies work a lot nicer than banks do in term of saving.

The 80s were fun and this guy is still living them.

Prior to the Building Societies act of 1986 and the Financial Services act of 1986, the building societies were restricted in what they could do and the banks were also restricted in what they could do. Banks could not offer savings account beyond a basic deposit account and mortgages from banks had greater restrictions compared to a building society. Building societies could not offer most banking facilities. After these acts were passed, they could compete with each on a level playing field with only a handful of differences.

So, pre 1986, building societies were better for savings.

Most building societies converted to banks after 1986. Whilst some mutuals have made a point of giving members benefits, most do not. So, if the building society account gives no member benefits then it is no different to a bank. An example of benefits would be like Royal London (an mutual insurer) which has a profit share scheme for members which pays into their investment plans a bonus each year (around 0.15% of value). So, they can quite clearly point to a mutual benefit.

There will be marketing spin from some mutuals to make out they are not doing it for the shareholders. Nationwide ran a marketing campaign for years on that basis. However, it didnt stop Nationwide marketing generally low quality Legal & General products at a higher price than the whole of market/IFA version. Or mis-selling PPI to their customers.

xylophone

When I was young, my dear old Dad advised me to save with a building society rather than a bank and in those days he was right - but things have changed!

If the OP is accepted for the various current accounts available, then clearly he could earn more interest.

Is the account held by Grandma held in bare trust for the OP or is it an account in Grandma's sole name that she regards as money she has set aside for him?