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There are many savings accounts on offer in the UK from many different banks and building societies. To get the best return, you need to select the correct account for your circumstances.
Don't just open one with your existing bank or building society. Don't assume that the big providers will offer the best deal, smaller organisations are often competitive. Rates can vary enormously so shop around for the best rate available using price comparison websites. To ensure that you are saving money, look for the AER (annual equivalent rate). In simple terms this is the average rate of interest paid each year and the higher it is the better the return you will get.
Easy Access Accounts
Think about how often you will want access to your cash; many deals have restrictions on how often you can do this. If you really need regular access to your cash then you would be better looking for an Easy Access savings account (sometimes called No Notice accounts). These allow you to withdraw your money without penalties at any time, but in some cases there are restrictions on the number of withdrawals you can make each year.
Fixed Term Accounts
On the flip side, if you can afford to leave your money tied up for some time, you can benefit from higher rates by looking for a Fixed Term savings account. With these accounts you have to tell your provider in advance (typically 30, 60 or 90 days) before making withdrawals, otherwise there will be some form of penalty.
Individual Savings Accounts (ISA)
Another aspect to bear in mind is tax, look to put some of your money into a Cash ISA which will provide you with tax free returns. Everyone should make the most of their tax-free savings allowance every year. Whatever type of account you are looking for, you can keep track of your income and spend using financial management software. Compare transactions across all of your bank accounts and credit cards, and get a complete view of your own finances.