The different types of savings account

You’ve mentally congratulated yourself on committing to putting some extra cash aside each month. But that’s just the first step. From the different types of accounts available, to who provides them, there’s a huge range of options to choose from.

That’s why we’ve put together a quick one-minute quiz to help you pick the best type of savings account for your circumstances. Simply follow the questions through to the end to reveal a list of products that should meet your requirements. Remember, this is only a guide. There are exceptions to every rule, but we hope you’ll find it a helpful starting point.

Whether this is your first account or you’re a serial saver, you might be surprised at how much savings accounts differ when it comes to rules and restrictions. Lots of factors can influence the type of product you need. From how regularly you want to save, to how much you plan to put aside. You should also think about whether you need access to your cash, and what accounts you may already have.

Personal savings allowance

Don’t forget to think about your personal savings allowance (PSA). And keep an eye on the interest you earn to plan accordingly. Your PSA is a tax-free allowance that allows you to earn interest on your savings without paying tax on that interest.

It will depend on the type of tax payer you are. If you’re a basic rate taxpayer, you’ll be eligible for the personal savings allowance of £1,000 in 2023/24. That means you can earn up to £1,000 a year in interest without having to pay any tax. If you’re a higher rate taxpayer, this limit is £500. If you’re an additional tax rate payer, you don’t get any allowance.

A few other things to remember

• You don’t have to open a savings account with your existing current account provider. It’s important to review the whole of the market to find which product is most appropriate

• Many savings accounts have a limit of £250 per month. If you’re looking to save more than this regularly, consider opening more than one account

• If you’re saving more than £85,000, spread your savings across providers to be protected by the Financial Services Compensation Scheme (FSCS)

• Remember, you’re only allowed to pay into one cash ISA per tax year.

Happy saving, and don’t forget to seek professional financial advice if you’re in any doubt about the suitability of the suggestions for your individual circumstances.

Take the quiz here to find out what savings account would be best for you.