There are a few different savings accounts to choose from, each with its own perks and benefits, and typically each with a different interest rate. Below are the main types of accounts you should look out for.
- Easy-access savings accounts
This pretty much does what it says on the tin. An easy-access student savings account means you can access and withdraw your money anytime without any limits. It also means you can put as much or as little money as you like into the account, as there is no minimum amount.
The downside to these accounts is that they tend to have lower interest rates, meaning you won’t earn as much as you could using other accounts. However, it does mean that should you wish only to put a few pounds away each month or dip into your savings whenever you feel like it, you can do so without any limitations.
- Fixed-rate savings accounts
This is the opposite. Unlike an early-access savings account, a fixed-rate savings account limits when you can withdraw your money.
Usually, they come with a minimum deposit amount, too, and expect your money to stay in the account untouched for anything from three months to five years. However, these do tend to come with much higher interest rates. If you know you want to save for the long run and you won’t need to dip in and out of your savings, this is a great choice.
Remember that if you withdraw your money before the fixed-term date, you may forfeit the interest you have already gained on that money.
This doesn’t apply to all current accounts, but some come with savings accounts as part of their package. The most common and best for students are cash ISAs and lifetime ISAs.
ISAs are suitable for long-term savings. So you could begin saving while still at uni and keep the account after graduation to continue saving. The best bit about ISAs is that all interest on the money in your savings is tax-free. You can deposit a maximum of £20,000 annually, and all interest will be tax-free!
Lifetime ISAs, also known as LISAs, are helpful if you plan to save early for your first house. This type of ISA account is designed to be used for purchasing a home or for retirement.
Only a few provide LISAs, and the interest rate is lower than that of many standard savings accounts. However, it’s good to know that for any money you put into an account below £4000 a year, the Government will give you a 25% bonus on top. This means you could earn up to £1000 a year in free money.
However, there are some drawbacks to a LISA, such as restrictions on when you can withdraw the money and the maximum value of the house you want to use it on.
