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<\/p>\nA bank is a financial institution with which you can deposit and withdraw your funds as and when required. Banks in the UK offer various types of accounts to their citizens. Opening bank accounts are as easy as understanding how they work. Both just need a bit of patience and effort. UK citizens\u2019 bank accounts can be classified into three types: current accounts, savings accounts and basic bank accounts. Here we answer a few most asked questions so you can make the most of your savings account.<\/p>\n
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Savings accounts were made with the objective of inculcating the saving habit among the Brits. Banks made \u2018saving money\u2019 valuable in their eyes by paying interest at a certain rate on the amount a person saved. That means the more you save, the more they\u2019ll grow. It works such that you save a part of your earnings every month. When it adds up to a sizeable amount, you can use it for purchasing the best and expensive home appliances or pay it as a deposit for your buying your own home or car.<\/p>\n
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You can never save enough. And UK citizens know that. Savings are very handy if you suddenly fall sick or lose your job. If you\u2019re planning to buy a house or car in the near future, it would do you good to start saving from now on. Home and car loans require to pay up at least a 20% deposit. You can then take the remaining 80% as a loan against your home or car respectively. You should be in touch with the rates and terms and conditions offered by banks and building societies. It\u2019s the best way to make your savings accounts work hard for you. A high interest rate means your savings grow faster and fatter.<\/p>\n
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Many people budget and cut down on their expenses to reach their savings target on time. These targets refer to the amount and duration of savings. If you want to save systematically, you should use a savings calculator. You just need to feed in how much you want to save each month and what the interest rate on your savings account is. It\u2019ll give you an idea of how long it may take to reach your target. If you don\u2019t have saving goals, you can still make more money by putting it in savings accounts offering competitive rates. The higher the rates, the quicker your savings grow so don\u2019t forget to shop around.<\/p>\n
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The term \u2018best\u2019 is subjective. A particular bank or building society may advertise a high interest rate but their terms and conditions may not suit you. There\u2019s such a wide range of savings accounts, deciding on one may be very tough. But, if you know the basics, you can save at the right place and in the right type of savings account.<\/p>\n
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One of the pitfalls is that there\u2019s a limit on the number of withdrawals you can make each year without losing interest. You might get the bonus interest rate for an introductory period of 12 months, after which your interest rate may fall drastically.<\/p>\n
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If you save in cash Isas, you don\u2019t have to pay any tax on interest. But, with a non-Isas, you can take advantage of a \u201cpersonal savings allowance\u201d. For a taxpayer in the 20% tax bracket, interest upto \u00a31,000 is tax-free, whereas, for 40% tax bracket, interest upto \u00a3500 is tax-free.<\/p>\n
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You can choose to receive interest either in a lump sum at the end of the year or in part every month. If you are not dependent on interest income for a living, it\u2019s best to go for annual interest payment.<\/p>\n
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