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Types of savings

As with most new activities, it's sometimes difficult to know how and where to start. Saving money is no different.

First, it helps to learn more about the different savings options available, so you can decide which works best for you. Then you can adopt some new habits to save. 

Savings accounts

There are different types of savings accounts, and choosing the right one depends on what you're saving for or the specific savings goal you want to achieve.

You may even consider having several different savings accounts, with each for a specific type of saving. For example, you could use a savings account to cover unexpected costs, one to save up for a holiday, another to build up a home deposit, and so on.

Savings accounts tend to differ in 3 main ways:

  1. Interest - the rate of interest you'll earn on the funds you deposit
  2. Term - the length of time you're prepared to tie up your savings
  3. Conditions - whether you must make regular small deposits or larger amounts whenever you have a surplus

 

Here are the main types of accounts, and the sorts of savings goals they can be good for:

Account type Key features Good for?
Term deposits (also called fixed-rate savings)

Better interest rates than a regular savings account. Your money is 'locked in' and inaccessible for a fixed period, from a few days to several years.

They usually require a minimum investment, and there will be a penalty for securing early access to your money. They offer higher interest rates than many other savings accounts.

 Depositing funds that you know you won't need for a while. Can also be suitable for meeting longer-term savings goals.
Savings account Fast or immediate access to your money, but the interest rates on offer are often very low. Money you don’t need for day-to-day expenses, but that you might need at short notice for emergency or unexpected expenses.
Account type Term deposits (also called fixed-rate savings) Term deposits (also called fixed-rate savings)
Key features

Better interest rates than a regular savings account. Your money is 'locked in' and inaccessible for a fixed period, from a few days to several years.

They usually require a minimum investment, and there will be a penalty for securing early access to your money. They offer higher interest rates than many other savings accounts.

Better interest rates than a regular savings account. Your money is 'locked in' and inaccessible for a fixed period, from a few days to several years.

They usually require a minimum investment, and there will be a penalty for securing early access to your money. They offer higher interest rates than many other savings accounts.
Good for? Depositing funds that you know you won't need for a while. Can also be suitable for meeting longer-term savings goals. Depositing funds that you know you won't need for a while. Can also be suitable for meeting longer-term savings goals.
Account type Savings account Savings account
Key features Fast or immediate access to your money, but the interest rates on offer are often very low. Fast or immediate access to your money, but the interest rates on offer are often very low.
Good for? Money you don’t need for day-to-day expenses, but that you might need at short notice for emergency or unexpected expenses. Money you don’t need for day-to-day expenses, but that you might need at short notice for emergency or unexpected expenses.

Getting into the savings habit

Once you’ve thought about which savings option best suits your needs, you can look at ways to put aside some extra money each month. 

Here are 5 ways to get saving:

  1. Create a budget
    Once you write down how you’re spending your money, you can identify opportunities to save.
  2. Track your spending
    Frequent purchases add up, so make notes or use an app to monitor what you spend.
  3. Keep savings separate
    It’s often easier to build up savings if you keep them in a dedicated savings account.
  4. Save a little and often
    Saving any amount, no matter how small, adds up. It also helps get you into the habit of saving.
  5. Compare and save
    Shop around and do some research before making a purchase or signing a contract. 
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Next steps

Explore more

Having a specific goal to save towards and a budget to stick to can help you stay focused on saving.

Find out how to improve your financial situation by firstly analysing it and then exploring ways to make positive changes.

The sooner you start to save for your retirement, the more you’ll save, and the more comfortable you’ll be.