Instant or Easy Access: With these accounts you can usually start off with just £1, get access quickly and take a variable interest rate which moves up OR down with the Base Rate. But, rates are usually a bit low as you can get money out whenever you like, bonuses and incentives may mean withdrawal fees. You can usually get a cash card or a passbook, and get better rates on internet accounts.
Notice Accounts: Usually need to start off with a few hundred pounds and you will not be able to get cash out straight away. Can be 30, 60, 90 or 120 days notice to access without a penalty. A penalty will usually be calculated on the amount withdrawn and will equal the interest rate for the notice term. Usually variable interest, based on Base Rate.
Regular Deposit: You must invest a certain amount each month. However, there is not much flexibility and there are limited withdrawals. These accounts can be instant or easy access or notice accounts and may have penalties for withdrawals or missing monthly deposits.
Fixed Rate Accounts: Offer fixed rate of interest for a set period. By not going with a variable rate, you may miss out on increases to interest rates, but you may also be better off if the Base Rate drops. Watch out for minimum balances. If you can afford to lock your money away, this is a good way to go.
Tax free savings! Individual Savings Account (ISA) ISAs are basically a tax-free wrapper for savings and investment products, which enable you to put away a set amount of money in any tax year to April. With other savings products, basic rate tax payers are looking at 20% tax, while high rate payers are looking at 40%.
Cash ISA: These offer a safe way of saving money in the short-term and are usually taken through banks and building societies. You only need to be 16 years old to open one of these. Cash ISA savers can also transfer money saved in their Cash ISA to a Stocks and Shares ISA.
Stocks and Shares ISA: These may involve investment funds; unit trusts, shares, bonds, as well as life insurance policies, and are usually taken through an investment company. As with any investment, there is a risk that you may not get all your money back. (Life insurance used to be a component in its own right, but became part of the stocks and shares component in April 2005).
Children’s Accounts: These accounts aim to help young people to save. When it comes to banking for people under 18, you will most likely be looking at savings accounts that offer limited access. Even children’s current accounts will be more similar to savings accounts. You may be offered free gifts, but there could also be restrictions, such as notice periods, limited withdrawals and size of investments. Children’s Accounts can be easy access, notice, bond or term account, but the parent will usually run them. However, bear in mind that Mini Cash ISAs are available to people from the age of 16.
Child Trust Fund: This Government initiative offers tax-free savings and investments for children born after September 2002 who are eligible for Child Benefit. The Government gives a £250 voucher to help start them off with their savings, and then another £250 when they are 7 years old. After this, friends and relatives can invest up to £1,200 per year and the child is not able to access the money until they are 18 years old. The fund can be based on a cash-based account, stocks and shares or a stakeholder.
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