Savings: Explain it to me like I'm 5

Isoei

Hello all - please excuse the joke in the title! Quite simply I struggle to understand a lot of the terminology regarding banking and bank accounts, etc. I am however considering opening another savings account, as I am at a point in my life where I should start putting away money for the "next steps", e.g., cars, houses, etc. All the grown-up stuff!

I currently have an instant saver account and a current account with RBS. I've had no issue with these, and am quite happy keeping them on. I also have a credit card via RBS, and everything is going fine with that.

But I hear a lot on different types of savings accounts, ISAs, etc. Could anyone provide some lived experience on what sort of savings accounts are out there and may be of use for putting away money? As I say, I'm not financially-minded. I simply just stash everything into my instant saver, but have heard there's more efficient ways of saving that also come with benefits such as interest. Advice appreciated!

friolento

There is a dedicated savings and investments board (you are on the current account one at the moment).

A lot, if not all, of your questions will be answered on

www.moneysavingexpert.com/savings

MSE_ForumTeam5

We've moved this across to the Savings board - as @friolento said, the MSE savings guides will also be a useful resource

Olinda99

I expect you know that if you put money into a savings account rather than your current account then you get interest paid to you

it is likely that your bank's instant saver account whilst providing instance access to your money should you need it also does not give you a very good interest rate - you can get more elsewhere

you might want to consider opening another saver account which is also instant access but not at your bank but somewhere else which will give you a better interest rate

there is also something called a fixed saver account which pays even more interest the downside being you cannot take your money out until the end of the term. for example if you've opened a one year saver then you have to leave your money in for a year. you do however normally get a higher interest rates for that year

if you earn more than a thousand pounds a year interest then you may start paying tax on this and that is the reason why Isas exist because if you save into an Isa saver then your interest is tax-free. 

eskbanker

This structured approach may help with identifying what your savings objectives are and how best to achieve them:

The Flowchart - UKPersonalFinance Wiki

kimwp

There are many products, some of the things you need to consider are-
- how much do you have and how much do you expect to save each month
- tax - there are different thresholds for paying tax on savings depending on what you earn. ISA's are accounts where you don't pay tax, but other restrictions apply.
- financial protection - think it's £85,000 per institution is protected, bear in mind that some banks belong to the same institution. It's worth have money across two institution in case one goes down as getting your protected money could take a while
- restrictions on withdrawing money - do these align with your plans
- restrictions on putting money in (only really applies to regular savers)
- interest rates - are these the best you can get, do they only apply to a certain amount of money in the account
- freebies with the account eg cashback, free subscription - are these of value to you
- extra options that come at a cost - are these cheaper than getting them elsewhere 
- qualifications - do you need to have other accounts open, pay in a monthly minimum or need to have a certain number or direct debits or standing orders to qualify - is it worth it to you to set these things up

InvesterJones

Well someone had to try it!

Kim_13

Do you have the RBS Digital Regular Saver? This is the only instant access account they have offering a good rate of interest (6% - though only on up to £5,000 and limited to paying in £150 per month.)

Albermarle

InvesterJones said:

Well someone had to try it!

I will copy this as a stock answer to some of the more basic questions some posters ask 

mebu60

Albermarle said:

InvesterJones said:

Well someone had to try it!

I will copy this as a stock answer to some of the more basic questions some posters ask 

Fortunately it's a magical garden so nothing ever wilts!! 

Middle_of_the_Road

Except that if we're using this horticultural analogy, it should also be mentioned, that in any given "season" your crop could be substantially thwarted by drought, pestilence or flood, and even decimated on very rare occasions.