Are your savings working for you?

Are your savings on track for 2025? When starting a new year, many of us update our calendars, join a gym or start planning our holidays, but how many of us make sure our savings are in tip-top condition?

Last year, the FCA released surprising data showing that over £250bn is sitting in everyday current accounts¹ offering zero interest. This means you could be losing out on £1000s every year instead of transferring to a savings account. Not only that, but your hard-earned money could even depreciate due to inflation.

While 57% of us² do have a savings account, bond or an ISA, if we don’t keep an eye on changing interest rates and regularly take stock of whether we have the best accounts for our needs, we may not be getting the best returns on our savings.

Even though we’re well into 2025, it’s not too late to take a look and make sure our savings are working for us.

A savings safety net

According to the FCA, a third (34%) of UK adults have either no savings, or less than £1,000 in a savings account. The current cost-of-living crisis has also affected the way we save; in the 12 months to January 2024, over half of us (53%) stopped or reduced how much we saved or invested to make ends meet, while 23% used our savings to cover day-to-day expenses³.

These stats could be one of the reasons as to why some of us prefer to have easy access to our savings, instead of locking them away for a set amount of time. But there’s a wide variety of options out there to choose from, depending on how long (and what) you want to save for, and many easy access accounts offer comparable interest rates to fixed rate ones. But even if you do lock your money away for longer, you could still access it if you needed to, often with just an interest penalty for that month you have withdrawn.

You could also start small – it might be daunting to transfer a large sum of money, but some savings accounts can be opened with as little as £1.

Growing your money pot will take time but start by understanding why you want to save in the first place and then put a plan in place to get there.

Once you get used to putting away money each month, it will soon become a habit, and over time you may be motivated to save even more and increase the amounts you’re putting away.

Remember as well that you will earn interest on the money you’ve saved and on the interest you earn along the way – known as compound interest payments. Every little helps!

Which savings account is right for you?

It may be bewildering to know which option is best, but it depends on a variety of factors. Ask yourself:

• What are you saving for (one-off purchase or retirement/a rainy day)?
• How long do you want to put the money away for?
• Do you need easy access to it or can you lock it away for longer to potentially get a better rate?
• How do you want to operate that account?

If you have a savings account already, have your reasons for saving or your circumstances changed? Have you had a look around/used comparison sites to check whether you could get a better interest rate? Perhaps the type of account you have isn’t right for you anymore, and you may find it beneficial to move some of your money to another account, or open a new one in tandem. Make sure your savings are working in the best way for you, instead of potentially leaving them in accounts which have matured to a lower rate.

Account options include:

• Fixed-rate savings accounts – the interest rate won’t change – great if you need reassurance about how much you will earn over the period.
• Variable rate accounts – the interest rate could be higher but will fluctuate over the term of the account.
• Cash ISAs – you can save up to £20,000 into an ISA tax-free each financial year but there are limits on withdrawals and you can only open one type each year, find out more.
• Fixed-rate bonds – could be a good option for those who can afford to set their money aside for a set period of time without withdrawing it.

You can also choose whether to have your interest paid monthly or annually. The monthly option could help towards regular payments, whereas the yearly option means you know exactly what you’ve earned/will earn over the year, and you can benefit from compound interest.

What account is best for you will entirely depend on your financial circumstances, what you are saving for and how long you want to tie your money up.

Whatever way you choose to save, remember to regularly assess it and shop around to ensure it’s still the best option for you and your goals. 

Check out our current range of savings accounts, ISAs and bonds.

¹ FCA - Cash Savings Market Review 2023

² Money - https://www.money.co.uk/savings-accounts/savings-statistics

³ FCA cost of living survey - https://www.fca.org.uk/publication/financial-lives/financial-lives-cost-of-living-jan-2024-recontact-survey-findings.pdf

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