If you have a regular savings habit, you’re already one step ahead of many people in the UK. But don’t rest on your laurels just yet – it’s always a good idea to review your accounts regularly to make sure you’re earning as much interest as possible, and that you don’t lose out on the latest savings account deals as they come onto the market. Here we look at four situations when you should take a look at your current savings plan to make sure you’re still getting the best deal:
1) When bonus rates come to an end
Many savings accounts offer attractive bonus rates for new customers, which are usually fixed for a limited period such as one year from the opening of the account. When this bonus rate ends, however, the interest rate on offer may be lower than you could get with other savings accounts. So, if you choose a fixed rate account that pays a high rate of interest, make a note of when the fixed rate finishes. It is quite common for your savings provider to automatically move your money into a lower-paying account once the bonus rate ends, unless you take action.
To make sure you get a good deal, check how long the introductory interest rate will last for and if there are any restrictions on you moving your money after the introductory rate ends. Some banks and building societies may levy a charge if you move your money – which means you may lose some of the interest you’ve earned – so make sure you take this into account.
2) When the Bank of England base rate changes
The Bank of England base rate is the main interest rate as set by the Bank of England, and is currently at a record low of 0.5%. If and when this changes, however, it’s well worth reviewing your savings account as a change in the base rate can affect the value of your savings.
If your interest is paid at a variable rate it can move up and down. This means that if the bank rate increases, you might get more money, but if the bank rate goes down, your rate of interest might go down too. If your interest is paid at a fixed rate and the bank rate increases, it might be worth checking to see if another account is offering a better rate.
3) Before making withdrawals or transfers – check the small print first
If you want to make a withdrawal from your savings account, check the small print carefully to see if there are interest penalties for taking your money out. Fixed rate savings accounts may not allow any withdrawals during the term, which is something to bear in mind before opening an account if you think you might need access to your money quickly.
Some savings accounts may be marketed as ‘easy access’ but they can still limit the number of withdrawals you make each year, often to just three or four. If you exceed this number, your interest rate could drop or you may lose a certain number of days’ earned interest.
4) When your circumstances change
Think carefully about how soon you are likely to need access to your money when choosing a savings account. This can vary depending on your life stage and priorities. For example, if you’re saving for retirement in ten years’ time, a fixed rate account may make sense, but as you approach your retirement date you’re likely to want more immediate access to your money. In this situation, it could make sense to move your savings to an easy access or instant access account instead.
Reviewing your savings regularly means that you stay on top of how they’re doing and can maintain control of them. As time goes on you might decide to increase how much you are putting into a certain account, or reduce it temporarily if a change of circumstances means your finances are under strain.
It makes sense to regularly review your savings as it means that you can make sure they are still in line with your financial goals. Compare a range of savings account options here >>
