Putting some money aside in a savings account is always a good idea. Savings are a great buffer in case of an emergency. They can also help you set some money aside for large purchases like a holiday or a new home.

Weighing up the various savings accounts available and need someone to break down the factors you’ll need to consider? Then you’ve come to the right place:

  • Interest rates

One of the perks of a savings account is that they allow you to earn interest on the money you save. You’ll probably need to compare savings accounts from several providers before you get a feel for what the best interest rates currently are.

Interest rates will be slightly better for savings accounts such as Cash ISAs, where you will have restricted access to your money for a certain period, which brings us on to the next point…

  • Access to Money

Decide how important it is to you to have easy access to your money. If you’re saving for a large goal, such as a house purchase, you may find that restricted access helps you meet your savings goal faster. Accounts with restricted access also bring the added benefit of a higher interest rate.

For UK residents under 40, a Lifetime Cash ISA is a great way to save for a first home. The government pays a bonus worth 25% of what you save in this account every tax year. This type of savings account is almost impossible to access unless you use it to buy a first home though, so you’ll need to be certain you want it first.

On the other end of the spectrum, an easy-access savings account could be ideal if you want to dip into the savings “as and when”.

They are usually easy to set up online. Check the terms before you commit, as some accounts may restrict how many times you can withdraw money in a year.

Always check whether the savings account you are opening offers you instant access to savings. Sometimes they ask for a notice period (30-90-day notice periods are common).

  • Tax

In some instances, you may find that you pay tax on the interest accrued in a standard savings account. This tax is usually subtracted from your interest automatically.

If you want to be sure that you can save without being taxed on it, it may be worth investigating cash ISAs. With a cash ISA, you can save up to £20,000 per year without paying tax on it (the limit is £4,000 for a Lifetime ISA).

You will be able to split your annual ISA allowance across the four different types of ISA if you choose to. These are Cash, Stocks and Shares, Innovative Finance and Lifetime.

  • Minimum deposits

Some savings accounts require you to save a certain amount per month as a minimum. Others make this optional but may only reward your interest if you have saved a minimum amount during that period.

Always check the terms and conditions beforehand so that you don’t tie yourself into an agreement to put away more than you can reasonably afford.

Savings accounts are highly recommended. With these tips, you now know what to look for when you’re searching for the one that best fits your needs!