Last updated: 23/07/2020 | Estimated Reading Time: 3 minutes

Options for your savings

Having some savings tucked away that you can dip into can be very helpful.

But with the wealth of options available when it comes to storing away your savings, it can be hard to work out which one is best.

In this guide, we’ll go through the three main options you have to choose between: ISAs, savings accounts and current accounts.

In This Guide:

Things you should consider before putting away your savings

Of course, the main thing you’ll want to think about will be the interest rates that you can get on your savings. Ideally, you’ll want the highest annual equivalent rate (AER) available so that you can earn as much as possible on the money you store away.

There are also a few other things that you should think about though before you settle on a savings option, including:

  • How much you are planning to put away – different products will be more or less suitable to different amounts of savings,
  • How long you plan to store your money away for – some accounts will require you to leave your money untouched for a certain period of time in order for you to fully benefit from the advertised interest rates,
  • Saving vs Investing – each come with different levels of risk and reward and so it’s worth working out which you value more before you choose a type of account to save your money in

Savings accounts

Savings accounts are essentially high-interest bank accounts that reward you for storing large amounts of money away for long periods of time.

Savings accounts will offer decent interest rates, though in order to get the best AER you are likely to have to lock your money away for a long term.

It is also important to take into account the fact that you will have to pay 20% tax on any of the interest you earn on any money you have stored away in a savings account.


An ISA is identical to a savings account in every way apart from the fact that any interest you earn is tax free. Because of this, there is a limit to the amount that you can keep in an ISA which is currently at £15,240 - in the tax year 2015-16.

Your ISA balance can be split between a cash ISA and a stocks and shares ISA.

Again, as with savings accounts, the longer a term you choose to leave your money in an ISA for, the better AER you will be offered.

Current accounts

Finally, if you don’t think that either of the above designated savings products are suitable then you could simply keep your savings in a current account. This has the added benefit of making your money more readily available, as savings accounts tend not to come with debit cards.

However, interest rates on current accounts tend not to be as high as those associated with ISAs or savings accounts. Not only is this the case but the interest you do earn is often capped. This means that you will only earn it on a certain amount of money, after that you will earn a lower rate of interest or maybe none at all.

So you may see a current account offering a 5.5% AER, but when you read the small print you find out that this is only earned on a maximum of £1,000. So if you’re planning to store away savings far in excess of that, you’d be better off with a savings account, from which you can transfer smaller amounts into your current account if needs be.