Savings account: Why is it important to have one?

21 June 2013 - Mark Maffia

    



Savings account: Why is it important to have one?


Almost everybody has a bank account salary is transferred onto it, payments go out from it, standing orders and direct debits are set up and it is generally a bank account in which money will be moved around.

If one overdraws a current account, interest will have to be paid, and if it is overdrawn over an agreed upon limit further charges will apply.    If you have credit on your current account, the bank will not pay any or just very little interest to the account holder.

 

The difference between a current account and a savings account

Unlike on a current account, on a savings account money will just be kept and, as it is strictly speaking a kind of loan to the bank, interest will be paid to the account holder.

 

Different kinds of savings accounts

Many people will open an easy access savings account.   The money on an easy access savings account will earn interest but also offers the possibility to get hold of one's savings at any time.   It is perfect to be able to regularly transfer money from one's current account to a savings account, and this can even be automated.    Slowly the money can grow, but if one needs to spend it, this can be done whenever one wishes to.   The interest rates on an easy access savings account can change from time to time, upwards or downwards, according to the fluctuations on the financial market.

 

Fixed term savings accounts

With a fixed term savings account, the interest rate will not change during the agreed time, and during this period one's money will stay untouched.    On a fixed term savings account one is therefore not able to access one's savings for a certain amount of months or even years, but the interest rates will be considerably higher than on an easy access account.

 

Which is the better savings account?

For everyday life most people choose an easy access account.    People who on the other hand have already saved up a high sum, and might be able to do without it for a while, will benefit from a fixed term savings account, as the higher the sum, the more it will earn, and in this case it will be particularly worthwhile.

 

Choosing the right savings account

Before opening a savings account it is definitely worth comparing different banks first, and their conditions, fees and above all their interest rates.    Opening a savings account is easily done online in a few simple steps.

 

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