Best Savings Rate
Achieving the best savings rate is a goal shared by most investors, whether you aim to maximise your earnings from an emergency fund or increase returns from your retirement account. The interest that you earn from your deposit is your payment for allowing a bank, building society, National Savings & Investments, or another financial institution to keep your funds and utilise them to further their own interests. In general, the longer you leave your cash stored away, and the more frequently you add to the balance, the more likely you are to achieve the best savings rate.
Saving money is a challenge for many of us. With all of the bills and unanticipated expenses that pop up throughout the month, it can be difficult to put aside cash for a rainy day. An account that offers the best savings rate may motivate you to increase your contributions to your savings funds in order to make your money grow. Even a tenner here and there adds up over time, especially when your account features the best rate available.
Factors that Affect Savings Rates
The type of account you choose plays an important role in determining whether you can avail the best savings rate on the market. Instant access accounts rarely offer the best rates, because customers are likely to withdraw their funds before they are able to earn an appreciable rate. Instant access savings accounts are ideal for emergencies, when you need to withdraw cash quickly. However, if you're keen on finding the highest savings account rates on the market, your best bet may be to invest in a medium term or long term scheme.
The rate that a financial institution chooses as a guideline for its own interest rates will also affect your earnings. The most commonly used guideline is the Bank of England, or BOE, base rate for monetary policy. The BOE's percentage point may rise or fall from one month to the next; however, rates rarely increase or decrease by more than 0.25%. If a more serious increase or decrease were to occur, your bank or building society would have the option to determine whether to pass this change along to its customers.
Your deposit may earn interest in different ways, which may in turn affect your rates. Flat interest remains fixed no matter how much you deposit in your account. Because this scheme does not encourage investors to increase their contributions, flat interest works best with short term accounts, or for investors who plan to save only a small amount of money.
Tiered interest is a more profitable approach for medium term or long term investors who intend to deposit a large sum. A tiered scheme encourages investors to increase their contributions by offering the best savings rate to customers who deposit the most money. The more you contribute to a tiered scheme, the higher your potential earnings.
Best Medium Term Savings Rate
The best savings rate for medium term investment may be available through a notice account or a regular saver. A notice scheme requires an advance declaration of your intent to withdraw money. Required notice may range from 7 days to 90 days, and you may incur significant penalties if you do not provide the required notice. In exchange for this inconvenience, you may receive the best savings rate available for medium term investors.
Regular saving strategies require regular minimum deposits in order to reap the rewards of the best savings rate. With regular savers, you must meet fairly strict guidelines regarding minimum deposits, maximum balances and withdrawal limits in order to achieve the high returns offered by these schemes. Many banks and building societies offer very generous promotional discounts to attract business and encourage large deposits. However, you may find that once you've met all of the requirements, you earn less than you anticipated from these promotional deals.
Best Online Savings Rate
Internet banks, building societies and the Post Office are now offering highly competitive deals to customers who are willing to conduct their banking transactions online. Because internet based institutions do not incur the high operational costs associated with maintaining multiple street branches, they are able to offer their customers promotional deals. Compare your potential earnings from a street branch to your returns from an online institution to see whether you might increase your earnings by transferring your banking business to an online option.
Finding the best savings rate should not be the sole focus of your search for an effective saving strategy. Consider the fees and penalties that a bank imposes, as well as the level of service it provides. Look for an FSA regulated institution that offers high returns in combination with promotional incentives and bonuses for customers who want to maximise their earnings.