Making your savings account work harder for you

Opening a separate savings account is a wise idea and the most popular savings method for UK adults. They allow you to keep your savings organised while gaining interest on them, building your pot over time. But not all accounts are the same, and there are various ways to make them work harder for you too.

Making your money go further is extra important in the current economic climate. Analysis shows the average pay rise was well below the rate of inflation at the end of 2022, leaving more people worse off than in previous years. With that in mind, read five practical tips for making the most of your money.

Shop around for deals

Interest rates change all the time, so it’s wise to shop around for the best deals available. There are different account types out there but ISAs pay tax-free interest on savings up to £20,000 each year, making them an especially appealing option.

Other features to look at include introductory bonus rates, minimum and maximum deposits and terms of access.

Make savings goals

Having clear goals in mind can make the process of saving itself more enjoyable while motivating you to stick at it.

Common short-term goals include cars, holidays and home improvements, while a new home, education fees and retirement are longer-term targets. Think about what matters to you and how much you need to save to make it a reality.

Set up automatic payments

A savings account is no good if you don’t add savings to it. If you decide you want to commit to saving the same amount each month, it’s logical to set up automatic payments and make the process easier for yourself.

You’ll be less likely to forget one month or feel tempted to dip into them for everyday spending.

Take advantage of compounding interest

Consistently building your savings over time allows you to take advantage of compound interest. This occurs once you start gaining interest on the interest that you have already earned in the past, increasing your rate of growth.

It’s a key reason for starting to save early in life, even if you don’t plan to use your savings for years to come. You’ll be in a better financial position with no extra effort or investment.

Try to avoid fees

Finally, it pays to be aware of any charges or fees associated with your savings account and how you can avoid them.

Many savings accounts come with restrictions and charges around withdrawals, particularly if it’s a high-interest account designed to lock your money away for several years. You may face other charges too, so read the terms and conditions and consider how best to access money as and when you need it.

 

Armed with this knowledge, you’re all set to start saving smarter.