5 Steps to choosing the right savings account
Looking around for the best savings account can be overwhelming. There are so many savings products available on the market, all of which are provided by the banks and other financial institutions in a variety of confusing terminology. So where do you start? How do you know which product to choose?
We all have different goals, incomes and requirements. That’s why it’s so important to find a savings account that caters to your particular needs.
To help you find the right product, we’ve put together five simple steps to choosing the savings account that meet your needs:
1. Create a financial profile
Write down your financial profile and your savings objectives. Include your income and expenditure, the savings you are able to put away each month and your long-term savings goals. Put together a monthly and annual budget. If your finances are in a mess, start with our basic steps on how to sort out your finances.
2. Research your requirements
Write a list of your requirements to establish your savings needs. For example, are you able to put a lump sum away for an extended period of time without needing to access that money in a hurry? If so, take a look at fixed rate accounts. Although they usually offer higher interest rates, you often won’t be able to withdraw your money at short notice without paying a fee. Alternatively, you might have a short term savings objective which requires you to access your money at regular intervals. In that case, take a look at instant access accounts. If you’re looking to put away a larger lump sum with a long term view, consider money market or investment accounts, such as a unit trust. Take a look at our Investment Guide for tips on how to invest your money.
3. Compare products
Once you’ve completed your financial profile, your savings requirements and your goals, it’s time to start comparing products. Comparison sites provide a user-friendly and simplified means of sifting through the hundreds of available accounts. Go to Justmoney for a comparison service tailored to your particular needs.
4. Speak to a professional
You may now have several options, so if you aren’t sure which one to choose then you should seek the help of a professional advisor or your bank. When you meet with your chosen financial advisor, describe your goals and requirements, and be clear on what you expect from your savings.
If there are areas where an opposing financial institution is charging less or is offering a higher interest rate, don’t be afraid to tell them. Ask them how their recommendation is an improvement on the other company’s products, and what they are able to offer you. Before leaving, make sure you have a clear list of the following fees:
- Monthly charges
- Debit order fees
- Deposit fees
- Withdrawal fees and restrictions (if applicable).
- Bonuses/ Contributions
- Termination fees
Try not to become too enamoured by short term bonus rates that are offered by some banks. It is important to take a long-term view and to ensure that your account offers consistency as well as competitive interest rates.
5. Keep up to date
Make sure you’re aware of any rate changes made to your account by reviewing your monthly statement. Keep up to date with new savings products and challenge your bank or financial advisor if you notice better deals elsewhere.
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