Savings are 'vital' during economic uncertainty

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Savings are 'vital' during economic uncertainty

When cash is becoming scarce, it can be difficult to think about putting any more to one side in a savings account. However, the current economic climate means that it could be wise for you to find ways of building up a savings nest egg to see you through the tough times.

According to recent research carried out by Friends Provident, it seems many young people are starting to prioritise saving for their future.

Paying into an account where they can leave their cash untouched to build interest for their futures is becoming increasingly popular with people in their 20s.

Approximately 44 per cent of this age group have already begun to pay into a pension scheme. Even more young people are planning to use different forms of savings account to give themselves some financial security, with 43 per cent telling the financial institution that they pay into an Isa and 35 per cent having equity portfolios.

But, with savings accounts available in several different forms, it can be difficult to know which one is right for you.

Before choosing an account, your individual needs and financial situation need to be considered, including how much of your money you are capable of putting away for a rainy day.

For those looking to have a separate account that they can siphon cash from their current account into, instant-access accounts are a good option. These allow holders to access their money immediately and can often be opened with a deposit of as little as £1. Daily withdrawals may be capped, but the limit is generally quite high.

But, if it's big returns on your cash that you're after, then these accounts may not be right, as they offer among the lowest rates of interest.

Regular savings accounts allow individuals to put aside a set amount each month to build up their cash over time. They can give high rates of interest, but often come with strict rules that may result in a loss of interest if broken. Banks will often only offer the highest levels of interest to customers who already hold a current account with them, which builds brand loyalty, but means other consumers can miss out on good deals.

To get higher rates of interest, money often needs to be fixed into an account for a set period of time. If you have the assets to be able to keep some funds secured in one place, notice accounts or cash Isas are the best bets.

Locking funds away in a notice account will accrue high interest, but, as a set period of time is needed before taking money out, it is not ideal for those needing cash quickly, as this timeframe can be as long as 90 days.

Isas remain a popular choice as they gain good interest for investors, with the bonus of being tax free. However, the maximum amount that can be invested is currently set at £3,600 a year, so people with high sums of money may be better looking at another form of locked account.

But, before taking out any savings product, it is essential to research which bank will offer the best rate of interest on your chosen type of account in order to get the best returns on your investment. Looking at deals that are only available online can provide higher interest rates than those available in branches. And, trying out smaller institutions can also see better returns on savings, as they will often give better rates than the high street banks as they compete to win new customers. ADNFCR-323-ID-19521640-ADNFCR

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