Savings accounts are among the safest investment options. One can use them to set aside money every month and accumulate wealth. The savings can be withdrawn anytime and used for a big purchase like a new car. Individuals can also use the money for emergencies or for building a retirement fund. There are different types of savings accounts, each with specific benefits. Choosing the right type is important to achieve one’s financial goals.

Short-term savings account
Also called instant-access savings accounts, these accounts are useful for people who are not in a position to keep their money locked for the long term and need to make regular withdrawals.

Short-term savings accounts enable clients to withdraw money whenever they need it. Account holders can use a debit card to withdraw money whenever needed. That said, banks have restrictions on how much one can withdraw during a specific period.

While short-term savings accounts provide users with an instant influx of cash, they offer lesser interest rates and benefits than longer-term savings accounts. The interest rate may vary from one bank to another.

Notice savings account
A key difference between these and other kinds of savings accounts is that holders must give notice to the bank before they can access their cash. The notice periods typically range from about 30 to 180 days. People must contact their bank to know the exact terms of their notice savings account.

Usually, notice savings accounts offer better returns than conventional easy-access savings accounts, which is why they are often counted among the best savings account alternatives. In terms of interest rates, they occupy a favourable middle ground between an easy-access account and a fixed-term savings account. Notice savings accounts are perfect for people who want to take advantage of higher interest rates without making long-term investment commitments.

Children’s savings account
Many parents wish to inculcate the habit of saving and investing in their children from a very early stage of their lives . A children’s savings account is a perfect avenue for such parents and kids. These accounts can be opened by, or on behalf of, individuals under the age of 18. Children can use this account to save pocket money and can continually add more money to it to bolster their net worth from a young age. Having a children’s savings account helps kids understand the value of accumulating and possessing money—habits that will make them more financially sound when they are fully grown. That said, parents must keep in mind that if their kid’s account makes over £100 in interest from money deposited by a parent, they are liable to pay tax for it. In many instances, parents are not aware of this requirement and end up shelling out a lot of money in taxes.

Opening up a children’s savings account is similar to creating a regular account in any financial institution. All parents need to do is provide documents to establish guardianship and do the KYC of their kids in the bank. The interest rates offered by banks for such accounts tend to be in the moderate range for account holders.

Tax-efficient savings account
Individual Savings Accounts (ISAs) provide dual benefits—they enable people to safely keep their money while receiving numerous tax exemptions and other benefits. The tax benefits depend on the ongoing liability limit levied by the financial budget. For example, if the ISA limit is £20,000 for the current tax year, only people who have saved more than this amount are liable to pay tax. Also, users will not need to pay tax on the interest their ISA earns during a specific period.

Different kinds of tax-saving ISAs are available. Many banks offer the options of loyalty cash ISAs and fixed-rate cash ISAs to account holders. Certain banks even offer innovative finance ISAs and lifetime ISAs to offer further diversity of alternatives.

Long-term savings accounts
These accounts are known by different names. Some banks call them limited-access savings alternatives, while others call them fixed-rate and fixed-period accounts. In fixed-rate savings accounts, holders are required to commit their money for an agreed period, while certain other savings accounts require users to deposit a certain amount of money each month over a while.

The stability and income assurance (through solid interest rates on investments) provided by these accounts make them popular. Account holders are required to commit a certain amount, whether as a lump sum or through regular payments, but that commitment lets them receive a higher interest rate. This kind of savings account is relatively impervious to external interest rates or recessions. Many people use these accounts as a retirement fund or an allocation to make big purchases (houses, cars, educational investments) in the long term.