How do savings accounts work?

The way savings accounts work is fairly straightforward. Once you’ve opened the account with your chosen provider, you simply deposit funds and it begins earning interest at the rate advertised. The interest is typically calculated daily and paid annually.

For example, if you open an account with £1,000 and then add another £1,000 after six months, you will earn interest on £1,000 for the first six months and then interest on £2,000 for the remaining 6 months.

Annual interest payments are usually paid on 31 December or on 5 April (for Cash ISAs). Savings accounts advertising material will provide a Summary Box that shows a projected balance based on a typical deposit amount.

Naturally, the higher the interest rate on the account combined with a larger amount of money in the account can lead to a greater amount of money that is grown over time. This is another reason why it’s important to shop around and find a savings account that suits your needs.

Why open a savings account?

Having savings set aside can give you peace of mind if there are any unexpected costs (such as a car breakdown) and helps put you in control. Saving can also help you build towards something special, like a holiday or car.

A savings account is an excellent way to make your money work harder for you with minimal extra effort. If you have extra money (such as an emergency fund) that you wish to keep separate from your current account then a savings account is good place.

You’ll actually earn money through interest and won’t have the additional costs that you can get through credit cards and overdrafts.

By putting your money into a savings account, you can begin to earn more money on top (as interest) while those funds aren’t being used. Not only this, but a savings account is an excellent way to save for larger purchases.

The extra money that you earn through interest could help you reach your goal more quickly than if it was left in a current account, or it might also help you afford a little bit extra, such as some new clothes to go on the holiday you’re saving for.

This short podcast will help explain more:

Mansfield 103.2 · SPOTLIGHT ON SAVINGS – MBS – 19th SEPT

How to choose the right savings account

Choosing the right savings account entirely depends on your goals, needs, and current financial situation. This is why it is extremely important to consider the following things when deciding on the type of account to open:

Interest Rate – The interest rate of an account is often the headline selling point, but you should look deeper at any additional strings attached such as how long the rate will last, the number of withdrawals you can make, any minimum regular deposits and if the interest rate is fixed or could go up or down.
Access – How often will you need to access the funds in the account and how will you be able to access them? Do you need instant access in an emergency or could you lock it away for a while? Do you need online access or are you happy to manage your account from a branch or by post?
Terms & Conditions – Another important consideration is the terms and conditions on the account. Such as how and when will interest be paid? Is there a maximum amount you can save? Does the interest rate include a bonus and when does it expire? It’s important to read the terms and conditions so you understand how the savings account works.
Tax – Savers in the UK have a Personal Savings Allowance, which sets out how much interest they can earn before paying tax. A Cash ISA can provide a tax-free^ haven for your money up to £20,000 per year.

^Tax free means you don’t pay UK tax on any income or capital gains your ISA makes.

If you’re unsure which account is best for you, our branch colleagues can help guide you through the process of making your funds do more.

View our available products

Here at Mansfield Building Society, we offer a range of different savings accounts, from Cash ISAs and Regular Savers to Fixed Rate Bonds, Easy Access Accounts, and more!

Simply browse our available savings products and find one that suits you best. If you wish to speak to a member of our savings team simply contact us on 01623 676350 or visit your nearest branch!

This introduction provides support on how to decide on your savings goals, how to budget and how to open a savings account.

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man and woman walking dog in forest — Types of savings accounts

A brief overview of the different types of savings accounts, from children’s accounts to fixed rate bonds and more.

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