Why choose high interest savings accounts?
Trying to select a type of savings account can seem daunting and confusing - with so many options, it can be hard to know where to turn.
High interest savings accounts are as their name would suggest - they ensure you receive a high level of interest on the funds you contribute.
There are many types of high interest savings accounts - such as a mini cash ISA - and it's important you consider exactly what you need from your account before choosing one.
Some things to consider when looking for high interest savings accounts or a mini cash ISA are how much you are looking to save and whether you can commit to putting away a certain amount each month. Perhaps you have a mortgage or car insurance you need to factor in, or - if you are looking to save for the future - you might want to consider using a pensions calculator to work out how much you should be putting away.
Meanwhile, you should also consider how inflation could affect your high interest savings accounts. While this may seem complex, it is actually quite simple - if the current rate of inflation exceeds the interest you will receive on your high interest savings accounts, you will actually be losing out.
So, you should always make sure your level of interest is higher than the inflation rate.
A popular type of high interest savings account is a mini cash ISA, which is the choice of so many people because it often offers good rates as well as providing quick access to funds whenever needed.
What is a mini cash ISA?
A mini cash ISA is a form of individual savings account. A tax-free choice for savings, cash ISAs are a popular option and can be great if you're looking to maximise the savings in your high interest savings accounts.
With a mini cash ISA, you will not be taxed on your nest egg at all - meaning you get to keep all the interest you make on your high interest savings accounts.
Moreover, you can withdraw money from your mini cash ISA whenever you need to, which is not the case with many other forms of high interest savings accounts, such as fixed rate bonds.
Three benefits of a mini cash ISA
A mini cash ISA holds multiple benefits, which is what makes it such a popular choice.
If you're keen to maximise the benefits of your high interest savings accounts, a mini cash ISA is a perfect option because of the lack of tax that you have to pay. This means you can keep every penny of interest you earn on the amount you contribute.
Access to the funds in your high interest savings accounts will not be restricted with a mini cash ISA, so you can withdraw your money whenever you please. However, you should note that usually a mini cash ISA has a maximum amount you can add per year. So, if you withdraw money from your high interest savings accounts, you may not be able to put it all back in before the end of the year, should this mean you would be adding more than your limit.
Meanwhile, a mini cash ISA is a low risk way to save your money, making it a safer bet for those concerned about economic fluctuations.
Where can I find more information about high interest savings accounts?
Before you choose your high interest savings accounts, it is a good idea to speak to various financial services providers in order to establish what would be the best option for you.
Additionally, there are a number of online resources which can help you learn more about high interest savings accounts and mini cash ISAs, such as the Financial Services Authority.
Remember, before selecting your high interest savings accounts or a mini cash ISA, consider what you need from your savings plan, as well as the interest levels that it will offer you.