Whether you’re saving for a big purchase or simply for a rainy day, saving money can be a good habit to get into. That’s why you may like to have at least one savings account that you can deposit money into. Below are some frequently asked questions to help you understand what a savings account is and how to use it.
How does a savings account work?
A savings account is separate to your current account and is a place for you to deposit money that you don’t need immediately, or that you wish to save and use for a big purchase. Through a savings account, you can earn interest on your balance and generally, the longer you leave it, the more interest you make.
Why should you have a savings account?
You could consider having a savings account, as not only will you earn interest on your money, it’s also a convenient and safe way to save. You may find having your savings separate to your current account is an effective way of managing your money as it can make it less tempting to spend it whilst it’s tucked away in another account.
If you have debts which charge you higher interest than your savings then it may be worth paying these off first before you start to save.
Who can open a savings account?
All UK residents can open a savings account; however restrictions apply to certain accounts. Please see our savings terms and conditions for more details.
How much do you need to save?
You can start saving with as little as £1. Then how much you save, and how often, depends on what you can afford. If you are saving up for something special, it might be worth calculating what you can save each month for the period of time you’d like to save over. Alternatively, if you’re saving for a rainy day, you might save a different amount each month, depending on your outgoings.
If you are aged 18-39 and saving for your first home or wanting to save for your retirement, you may consider the Lifetime ISA as this account was introduced by the Government for these specific savings goals.
What are the different types of savings accounts?
There are several different types of savings accounts to suit people of all ages, including children. Each savings account comes with its own interest rate, terms, and conditions, so it’s important to check the detail to see which type could be right for your savings goal.
The most common account types are:
- Instant or easy access: an account that allows you to deposit and withdraw money at any time. Instant access accounts refer to those in a branch environment and easy access usually refers to online accounts.
- Notice account: an account which usually lets you pay in at any time but requires advanced notice before withdrawing. The notice period varies depending on the account, but you could face an interest penalty if you withdraw without giving notice.
- Regular saver: an account which requires you to deposit each month. There is usually a maximum and minimum amount permitted to be saved each month.
- Fixed rate bond: an account that locks your money away for a fixed period of time in exchange for a fixed interest rate for the whole term. Any withdrawals, if permitted, during the initial term usually come with a loss of interest penalty. Always check the terms and conditions of the account.
- Cash ISA: similar to an instant access account, you can usually deposit and withdraw your money at any time. However, with an ISA you don’t pay tax on the interest you earn, and it has a £20,000 deposit limit per tax year.
You can find our full range of savings accounts here.
How safe is your money in a savings account?
Money held with UK-authorised banks, building societies or credit unions is protected by The Financial Services Compensation Scheme (FSCS), up to £85,000 per person. The FSCS is there to protect your money if your financial service provider goes out of business, and you’ll normally get your money back within seven days. The FSCS is funded by the financial services industry and is free to consumers. To find out more, visit FSCS.org.uk.
Bear in mind that if you are saving in multiple accounts from different businesses that are owned by the same provider, for example Beehive Money and Nottingham Building Society, then the maximum compensation will be shared between the accounts.
How to calculate interest earned on a savings account
If you know the amount you plan to save each month and the interest rate on the savings account you’re looking at, you can use our savings calculator to see how your savings might grow over the next twelve months.
How to open a savings account
To open a branch savings account with The Nottingham, call your local branch and speak to one of our advisers. They will require your personal details and possibly identification and proof of address. If you would like to open a Lifetime ISA, please apply online. Please note you cannot open a branch account by post.
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