A savings account pays you interest on the amount you have saved and is designed for putting money aside for the future. You can use it to either save regularly or pay into it when you have some spare cash. There are different types of savings accounts depending on whether you want to save a fixed amount regularly and how quickly you may want to draw your money out. With most types of savings account, the rate of interest paid to you may go up or down from time to time.

The simplest savings accounts enable you to draw your money out as soon as you need it. You can pay in as much or as little as you like as often as you wish. You can usually open this type of account with as little as £1. The interest paid on this type of account is not likely to be very high.

If you are prepared to save a fixed amount regularly, say, every month, some banks will offer an account for regular savers. The rate of interest will usually be higher than on a normal savings account, but if you miss a payment, the interest rate may fall. You may also be limited to a certain number of withdrawals a year.

If you are saving for something big you may earn a higher rate of interest by opening a notice account. With this type of account you will need to tell the bank before you draw your money out. Depending on the type of account you open, you may need to tell the bank 30, 60 or 90 days before you need to draw the cash. You may be limited to a certain number of withdrawals a year.

If you have quite a large amount of money that you want to put into the bank for a year or more, some banks offer a fixed-interest bond. The advantage of this type of account is that you can guarantee the amount of interest you will earn on your savings as the rate of interest will be fixed for the term of the bond. You will not be able to draw your savings until the end of the fixed period though, so this type of account would not be suitable if you are likely to need your money in a hurry.

Will I have to pay tax on my interest?
Normally tax will be deducted from the interest before it is paid to you but unless you are in a full time job, you probably won’t be earning enough to have to pay tax. If this is the case then you can ask your bank to pay the interest without deducting tax. The bank will ask you or your parent or guardian to complete a form so that it can do this for you.

Will I have to pay bank charges?
If you keep your account in credit, you will not normally be charged for basic services such as paying in cheques, taking money out and setting up standing orders and direct debits, but do check with your bank as some types of account provide a package of services for a set monthly charge. Some banks may make a charge if you draw money from your account using another bank’s cash machine. Always ask your bank for a list of the services that it charges for.

Please register or login to add this to your interests.