Over the last year or so, savings rates have plunged to all time lows, but providers still want to attract your hard earned cash. What you need to do is select the correct account for your circumstances and get the best return you can find.
Don't just open one with your existing bank or building society. Also, don't assume that the big providers will offer the best deal. It's far from it at times, as smaller organisations often provide much better deals. Rates can vary enormously so shop around for the best rate you can get. This is easier than you think, for example check out some comparison sites like Beat that Quote.
To find the best deals, 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.
Also, 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.
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.
Alternatively, you could look at Fixed Rate Bonds. These pay a set amount of interest for a certain period of time. The length of the term can be anything from six months to five years, but generally speaking, the longer the term the higher the interest rate. However, you cannot usually access your money during the fixed rate term, so this type of account is only worth considering if you have money you can afford to lock away. Remember too that there is a risk you could find yourself stuck on an uncompetitive rate if interest rates rise significantly during the fixed rate term.
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. You can invest up to £5,100 in a Cash ISA this tax year (the tax year runs from 6 April to 5 April the following year). There are different types of account easy access, fixed rate and notice accounts and interest rates vary. It is therefore worth comparing rates to ensure you get the best deal.
Finally, whatever the type of account you are looking for, it's worth restating the importance of shopping around for the very best deal via Beat that Quote or others. Why not have a look today?