These various savings products can have very different T&Cs, particularly in relation to how much you can deposit and how much notice you need to give to access your money – and, of course, they will pay very different rates of interest.
But amid this mix, it is regular saver accounts that have been attracting more attention of late, not least because they offer some of the most competitive rates on the high street but are widely available to the vast majority of savers, including those on relatively low incomes.
A quick glance at the various best buy tables published online or in newspapers shows that this bucks trends seen elsewhere. As a rule of thumb, the accounts paying the highest savings rates are typically aimed at savers with large sums to deposit or require them to be able to afford to lock their money away for 3-5 years.
But many people are clearly not in this position – particularly following a cost-of-living crisis that has made saving significantly harder for many families and individuals.
However, with inflation falling back to targeted levels and mortgage rates starting to edge down again, there is the opportunity for hard-pressed families and individuals to start rebuilding their financial resilience and get into the savings habit again.
This is where regular saver accounts can help. As the name suggests, they require savers to put aside a set amount each month, usually between £10 and £100, rather than making one-off or ad hoc deposits.
This can be a great way to get people saving. Putting aside a small amount each month can help people get into the savings habit, and by saving little and often, it can be surprising how quickly people accumulate some worthwhile rainy day savings.
As stated, most regular saver accounts pay competitive rates of interest, and accounts typically run for 12 months, although two-year accounts are available.
But as with any savings account, it is worth checking the T&Cs to make sure it is suitable, as some regular saver accounts will be a lot more flexible than others.
The first thing to check is whether the minimum amount is affordable, and critically, what will happen if you can’t pay it that month. Some accounts might impose a penalty for missed payments (usually in terms of reduced interest); others might close the account at that point, so savers won’t benefit from the higher interest rates for the full term.
Flexibility for the future
Some accounts do offer more flexibility, though. Hinckley & Rugby Building Society’s Regular Saver 30 Day Notice Issue 2, for example, allows savers to reduce or miss monthly payments without penalties being imposed.
The other aspect worth clarifying is when and how you can access this money. Some accounts will not allow access until the end of the term. This may work for savers looking to squirrel money away for the future, who already have emergency reserves elsewhere they can call on should the washing machine pack up or the car fail its MOT.
But such restrictions won’t be suitable for those who might need this money at short notice. Some regular saver accounts do allow access, though there may be a short notice period.
There may also be differences in the terms of these products. The vast majority run for 12 months, but there are some in the market offering a two-year term, combined with the flexibility to stop, decrease or – just as importantly – increase monthly deposits, this gives savers the opportunity to build up a more substantial nest egg.
For example, those who can save £1,000 per month could put aside £24,000 over the term and earn a generous interest rate on this sum.
Regular saver accounts can help a diverse range of savers. They can be an excellent starting point for the one in four people in the UK who have savings of less than £200. Provided these accounts offer flexibility and access, they offer an effective way of getting people saving, rewarding their efforts with a decent return.
But these accounts can also help those who already have savings in the bank and are looking to make sure their money works harder for them, by capitalising on some of the best savings rates on the high street. As such these accounts can be a good way of putting money aside each month for a specific goal – be it a future holiday, a new kitchen, or funds for when the kids leave school and are heading off to university or an apprenticeship.
Whatever your saving goals, a regular savings account should be a regular part of your financial life.
Danny Cranie is chief customer officer at Hinckley & Rugby Building Society
