When we have worked for much of our adult lives and invested the fruits of those labours in caring for our children and ensuring their smooth transition into independent living we find ourselves able to invest some of our surplus income in providing savings for our future. Naturally, we want the best return on our investments. As this brief article will exhibit, the issue of cash savings accounts and which one to choose is far from straightforward, particularly during periods of economic downturn where the financial institutions are reluctant to offer anything other that parsimonious rates of interest. The first account that we will look at is the current account.
The Current Account
For reasons that will become clear, the current bank account is not one in which it is not always wise to invest your savings.
There are many current accounts that offer 0% interest on monies invested,
regardless of the amount in the account. Obviously, being a current account you have unfettered access to your money and all the facilities that come with a current account, such as a cheque book and debit card but a combination of the low (or even non-existent) interest rates available and the fact that your bank is likely to have other savings options that are more beneficial and only marginally less
flexible means that you should hesitate before leaving anything other than the bare minimum in a current account.
That means you should keep enough to service your monthly needs and
ensure that any surplus is paid into a more efficacious savings
account.
The next account we will look at is only slightly less flexible than a current account but it is almost certain
to provide a greater return on your savings. This is the Easy Access
Account.
The Easy Access Account
As its name implies, the easy access account offers a straightforward way of accessing your funds as and when you require them. However, there is likely to be a limit on the amount of money that can be withdrawn at any one time.
Because the savings institution does not have the advantage of knowing that it will be holding the saver's money for an extended period of time, as it does with some of the other accounts that we will examine later, the interest rates
offered on easy access accounts are likely to be relatively low.
However, savers are likely to find that the easy access accounts
that provide the most attractive interest rates are those that do
not require an office or branch based organisation of the account.
Accounts that can be run by telephone or, even more likely to
attract generous interest rates, through the internet, cost the
savings institutions less to administer and consequently they are
willing to provide higher interest returns on savings.
Even with that advantage, however, it remains the case that Easy
Access accounts are amongst the most unprofitable of savings
products presently on the market. For accounts that provide a
greater return the savings institutions want some guarantee about
the amount and/or the length of the investment.