Regular Savings Accounts – What You Need To Know
Regular Savings Accounts – What Are They?
A Regular Savings account is an account designed for people to save money each and every month. While the interest rates can be appealing these accounts often come with restrictions such as limiting how much money you can withdraw and make you pay every month.
The reason these accounts have such high-interest rates is that they usually last for 12 months. Once this term has ended, the rates get slashed. Regular Savings Accounts are often used as a marketing tool to gain your custom and might require you to have a current account too.
All the interest that the Regular Savings Accounts earns will be paid tax-free. Basic taxpayers can enjoy £1000 of tax-free money or if you’re on the higher tax scale £500. If the interest paid is more than this allowance the government will take tax via your tax code or the self-assessment if you’re self-employed.
It’s worth pointing out that the interest you earn will be about 50% of the interest rate on the account as the month increases monthly not in one large sum.
Is Your Money Safe?
After the credit crunch, the government had to bail out Royal Bank of Scotland, Lloyds and Northern Rock, so it’s only natural to ask “is your money safe?”
As long as the money is held in a regulated UK bank or building society account, then it’s protected by the FSCS compensation scheme. But there is some additional information you need to know. This scheme will only cover up to £75,000 per person. Should you have more than this, then additional monies are not included.
For most people, the £75,000 limit is not a problem. Limitations on Accounts will mean you won’t get close to £75,000 in savings. With accounts that let you deposit more or if you have multiple savings accounts with the same bank, you might eventually pass £75,000. To ensure you remain protected you should spread your savings accounts across multiple banks.
Unfortunately, regular savings account get a lot of bad press. Mainly because people often don’t understand the rates being offered. People will complain that they only got half the advertised interest, but this is because they expected to get more. Not because the banks underpaid.
Maximize Earnings With Drip Feeding
A technique known as drip feeding can help you to earn the most interest possible. With a regular savings account, it will take the time to build up any amount of money you have in there. While banks will give you a high-interest rate, it’s only on the current balance which I will start small. If you have one lump sum, you can take advantage of drip feeding.
To do this you want to put the lump sum into the highest paying interest current account, and then you need to make regular payments into the regular savings account. With this method, you are slowly moving money from 1 account to another month by month. At any month your money is earning the most interest it can.