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How does a savings account work? – by Monzo

There are lots of different kinds of savings accounts, like regular savers, instant access savers, ISAs and more. Find out which savings accounts you can open with Monzo.

What is a savings account?

A savings account is a place to keep your money and earn interest on it.

There are lots of different kinds of savings accounts, like regular savers, instant access savers, ISAs and more. Find out which savings accounts you can open with Monzo.

The interest rates, fees and how you access your money vary, depending on which kind of savings account you choose and the bank or building society you’re with.

When you choose a savings account, it’s important to check and compare the Annual Equivalent Rate (AER) on savings accounts, as well as the interest rate. AER tells you what the interest rate would be if interest was paid and compounded once each year. AER makes it easier to compare how much you can expect to grow your savings over time.

Savings accounts are protected by the Financial Services Compensation Scheme (FSCS), which means up to £85,000 of your money’s protected. If you have more than that in one account,  you can split this money between different bank accounts.

Looking to open a savings account? Here’s how to open one with Monzo

We’ve made it simple to start saving. Open a Savings Pot in seconds and you can earn up to 1.50% /(AER/Gross fixed) interest on your money, you can withdraw in 12 months and all you need is £500 minimum deposit.

You have a choice over providers with competitive interest rates to suit your savings goals.

The money you put into Savings Pots is fully protected up to £85,000 by the Financial Services Compensation Scheme (FSCS).

How does a regular savings account work?

A regular savings account is an account you pay into every month, for a certain period of time.

This can be helpful if you can reliably set aside money each month (you’ll normally need to pay in between £10 and £500) and you don’t mind having limited access to savings. They also usually have a high interest rate (higher than a current account or ordinary savings account). But your rate can go down if you miss a payment or withdraw money.

To open a regular savings account, you usually need to have a current account with the bank you’re looking to open the savings account with. People often choose a regular savings account if they don’t want to invest a lump sum, but want to get into the habit of regular saving.

To get a regular savings account you’ll need to contact a bank or building society either online or through a branch.

What’s an instant access savings account?

An instant access savings account often pays less interest than other savings accounts, but more than a current account. You can withdraw money whenever you want and can access your money anytime.

To open an instant access savings account, you don’t need lots of money either, so they’re often useful if you don’t want to lock away your money and need access to it just in case.

What’s an Individual Savings Account (ISA)?

An ISA is a type of savings account. You can earn interest, dividends and capital gains from an ISA without ever being taxed.

The amount you’re allowed to pay into an ISA is limited by the UK government – the current allowance is £20,000 per year. There is more than one kind of ISA.

You can now get tax-free savings through your Monzo account. All you need to do is create a Savings Pot to get started.

What’s an easy-access savings account?

Easy-access savings accounts let you take money out of them quickly.

Unlike some regular savings accounts, you can usually transfer money out of your easy-access savings account for free.

But just keep in mind that some easy-access savings accounts limit the amount of withdrawals you can actually make.

It’s also important to remember than even though some easy-access accounts will give you a certain interest rate when you sign up, this can sometimes only last for a few months. Once it’s over, the interest rate might drop! So it’s worth checking the terms before.

How much money should you have in a savings account?

The amount of money that’s best for a savings account depends on how much money you’re looking to save, and what you’re looking for in a savings account.

You might prefer saving smaller amounts more regularly, or you might have a lump sum. If you’re looking to put a lump sum of money into a savings account, here’s what you need to know.


Source: MONZO

Jung Min-seo

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