Whether you’re a savvy saver or struggling with a budget, opening a savings account could be perfect. However, the choice can be overwhelming – especially for students!
Most banks offer perks for student savings accounts that try to draw you in, so it can be hard to know which will benefit you the most. There are more than just the perks to consider when choosing the right savings account; luckily, we have some top tips for you to follow!
You don’t exactly need a savings account, but it could be super beneficial. Whether you have a part-time job and want to put your wages aside, or you like to put a bit of money away each month from your student loan, having a savings account is a great way to do so. Not only can you split your savings from the money you want to/can spend, but if you have a reasonable interest rate on the savings account, you can actually earn free money.
The more money you put into your account, and the longer you leave it there, the more interest you’ll earn on simply putting your own money into a savings account.
As mentioned, there are many different savings accounts to choose from, each with its own perks and benefits, and typically each with a different interest rate. However, below are the main types of accounts you should look out for.
The name of this account pretty much describes it. An easy-access savings account means you can access and withdraw your money anytime without any limits. It also means you can put as much or as little money as you like into the account, as there is no minimum amount.
The downside to these accounts is that they tend to have lower interest rates, meaning you won’t earn as much as you could using other accounts. However, it does mean that should you wish only to put a few pounds away each month or dip into your savings whenever you feel like it; you can do without any limitations.
This type of savings account is quite the opposite of an early-access one. Unlike an early-access savings account, fixed-rate savings account limits when you can withdraw your money.
Usually, they come with a minimum deposit amount, too, and expect your money to stay in the account untouched for anything from three months to five years. However, these do tend to come with much higher interest rates. If you know you want to save for the long run and you won’t need to dip in and out of your savings, this is a perfect choice.
Remember that if you withdraw your money before the fixed-term date, you may forfeit the interest you have already gained on that money.
This doesn’t apply to all current accounts, but some come with savings accounts as part of their package. The most common and best for students are cash ISAs and lifetime ISAs.
ISAs are suitable for long-term savings. So you could begin saving while still at uni and keep the account after graduation to continue saving. The best bit about ISAs is that all interest on the money in your savings is tax-free. You can deposit a maximum of £20,000 annually, and all interest will be tax-free!
Lifetime ISAs, also known as LISAs, are helpful if you plan to save early for your first house. This type of ISA account is designed to be used for purchasing a home or for retirement.
Only a few provide LISAs, and the interest rate is lower than many standard savings accounts. However, it’s good to know that for any money you put into an account below £4000 a year, the Government will give you a 25% bonus on top. This means you could earn up to £1000 a year in free money. However, there are some drawbacks to a LISA, such as restrictions on when you can withdraw the money and the maximum value of the house you want to use it on.
It may come as a surprise (or not), but you’ll be taxed on the interest you earn on your savings. However, this is only if you’re working and earn over £17,500 a year. If you do make over this threshold, you’ll pay tax on any interest above £1000 – so you can earn £18,500 before having to pay tax on any interest you earn.
If you’re not working and don’t earn above £18,500 per annum, you won’t pay a penny in tax on your savings. Keep an eye on this, though, as the bank may accidentally tax you. If this happens, don’t worry! You can claim a refund. However, if you’re worried about getting taxed, you should look into the two ISA accounts mentioned above, as they’re tax-free!
Looking at all the different savings account types might leave your head in a spin – but it doesn’t have to! All you need to do is the following to make sure you choose the right account for you:
The interest rates, perks, and benefits on savings accounts fluctuate and change every year – unless, of course, you’re in a fixed-rate savings account. It’s best to shop around first and see which has the best interest rate and any added perks to keep you as a customer. This way, you can save money, earn interest, and reap the benefits of the bonuses some banks offer. Make sure to do your homework, and don’t choose the first savings account you see – look around first!
There are also many other ways to save money while at uni. One of these ways is by making sure you’re not paying too much for your bills – especially if you’re getting a poor and cheap service!
Here at Split The Bills, we use the best utility providers and create a package that suits you. Plus, if you’re worried about your flatmates not playing their half, we’ll chase them for you! We ensure the bill is split equally between all parties so you’ll never feel like you’re paying more than your roommates. If you want to know more about how we work, you can always get in touch, and we will be happy to help!
Split The Bills is not a financial advisor. This should not be considered as professional financial advice. Do your own research & consult a professional financial advisor before making any financial decisions!
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