Savings accounts

You’ll need to be a UK resident to open an ISA. Other than that, it’s up to each account provider to set its own rules.

You may have to be 16 or 18 for some accounts, and some banks might reserve their best-paying savings accounts for customers who have a current account with them.

Meanwhile, some small building societies may restrict their accounts to people who live in their area.

Make sure you check the eligibility rules for any account you’re considering.

Yes: most savings accounts are also available as joint accounts, although some providers may require one of you to be an existing customer first.

You can’t, however, open a joint ISA. That’s because it’s an Individual Savings Account intended for one person only.

A poor credit history shouldn’t be a barrier to opening a savings account.

Most banks don’t carry out credit checks with this type of financial product because there’s no borrowing involved. So, bad credit shouldn’t affect your application.

Interest is usually paid monthly or annually, depending on the savings account you have.

You won’t have to pay tax on interest for an ISA as it’s a tax-free savings account.

Interest from other types of savings accounts counts as income, and how much tax you pay depends on how much interest you earn.

Basic rate taxpayers have a personal savings allowance of £1,000, so most people won’t need to worry about paying tax on their interest.

If you’re a higher-rate taxpayer, your personal allowance drops to £500, while additional rate taxpayers don’t get an allowance.

If you go over your allowance, you’ll pay tax on any interest over your allowance at your usual rate of income tax. That’s 20% for basic taxpayers and 40% for higher-rate taxpayers.

If you’re covered by the Financial Services Compensation Scheme (FSCS), then deposits up to £120,000 are protected.

This limit applies to all your money held by one banking group.

If you have several savings accounts with a banking group or a current account too, your total balance across all accounts will be protected up to £120,000.

For example, Lloyds Bank and the Bank of Scotland are in the same group. So if you have separate accounts with each of them, your £120,000 balance applies to both, not each.

If you have a joint savings account, you get combined protection up to £240,000.

The Lloyds’ banking group includes:

• Lloyds Bank

• Halifax (soon to be changing to Lloyds Bank)

• Bank of Scotland

• Mbna.

The NatWest banking group includes:

• NatWest

• Royal Bank of Scotland (RBS)

• Ulster.

The Barclays banking group includes:

• Barclays

• Tesco Bank.

The HSBC banking group includes:

• HSBC

• First Direct.

If you have outstanding credit card debts with high interest rates, it might be best to pay those off before putting money into savings.

That’s because – unless you have a 0% credit card – you’ll almost certainly be paying a higher rate of interest on debts like loans and credit cards than you’ll be earning in savings interest.

Once you’ve cleared your debts, you’ll have more money and can save faster.

If, on the other hand, you’re paying off your credit card in full every month and keeping up your mortgage payments for example, it might be a good time to start saving.

Everything you buy is influenced by inflation. If inflation rises, so will the cost of everyday goods – for example, groceries and fuel.

If your savings account interest rate is lower than the rate of inflation, you’ll be losing out because the money earned won’t buy you as much as it did a year ago.

If you want to make the most of your savings, make sure the interest rate you’re getting is higher than the rate of inflation.

Some savings accounts offer high interest rates as incentives for new customers.

But once the introductory period is up, you could be left with an interest rate that’s much lower. It could be a good idea to stick around for the introductory rate, then compare and switch again.

Always check the terms of the introductory rate, as breaking certain rules could mean you lose it – for example, if you withdraw money before the end of the introductory period.

It depends on the type of account. Easy-access savings accounts let you take your money out whenever you want. However, some may specify a maximum number of withdrawals a year.

Meanwhile, most fixed-term savings accounts will charge you a hefty penalty if you make a withdrawal before the end of the fixed period.

The best savings account for your children depends on how old they are and if you want them to have access to their savings.

For example, with a Junior ISA, your children won’t be able to take any money out until they’re 18.

After a certain age, children can apply for a savings account themselves. But under 16s may need a parent or guardian to go with them into a branch, so always check the details of the account.

This will depend on your account provider. You might be able to close some accounts online, while for others you might have to visit a branch.

If you have a fixed-term savings account, you might not be allowed to close it before the end of the term. Or if you do, you may have to pay a significant penalty.

If you want to move your ISA to another provider, you’ll need to complete a transfer form.

You shouldn’t close the account with the original provider without doing this, as you won’t be able to reinvest that part of your tax-free allowance again.

It’s a good idea to regularly compare the market to make sure your money is still in the best savings account for you.

Interest rates can change, new accounts and even new banks become available, and your own personal circumstances might change too.

You don’t need to review it every week, but it’s a good idea to keep an eye on the base rate and what different banks are offering if it changes.

Yes, savings accounts are a good option for growing excess cash or saving for a particular goal, such as an emergency fund or deposit on a house.

Their main pro is that you earn interest, so your money grows, which it won’t do in a standard current account.

There are several alternatives to a savings account. If you’re looking for an account to put excess cash into or make budgeting easier, consider a regular current account.

If you want your money to grow, you could consider investing. Just bear in mind that this is high risk, and the value of your investment could go up or down.