Which is better for your money: regular savings or easy-access savings?

We investigate which offers the best return on investment: a regular savings account or an easy-access savings account

The practice of saving is fairly simple, but you must choose the right kind of savings account to maximize the interest that savings providers offer.

Millions of savers may be losing out on the best savings rates and the opportunity to grow their money. According to a TotallyMoney study, one in three people (37 percent) haven't changed their accounts in five years, and 27 percent have never done so.

Therefore, it may be time to transfer your savings to a higher-paying account even if you currently have any.

There are many factors to consider when deciding between an easy-access savings account, a regular savings account, or a fixed rate, including your financial flexibility requirements and the amount you can afford to save.

According to comparison website Moneyfacts' finance expert Rachel Springall, "A regular savings account is a good choice to instill the savings habit because many of these accounts require savers to put money away every single month."

Those who "want a pot they can quickly access in case of a financial emergency" might find easy-access accounts appealing because they offer "the most flexibility," according to her.

We investigate where your money might be more effectively spent, with regular and convenient savings accounts that offer competitive interest rates.

How does a savings account with easy access operate?

An easy-access savings account provides you with flexibility with your money, as the name suggests. You have flexibility with withdrawals and can access your savings whenever you'd like with traditional easy-access savers.

Although the interest rate is variable and subject to change at any time based on market movements, it is applied to the total amount in the account. These straightforward savings plans are excellent for emergency funds or rainy-day savings while still allowing you to earn interest.

However, despite a high headline rate to entice you, lenders are increasingly placing hidden restrictions on easy-access accounts.

A bonus rate in the headline rate for a predetermined amount of time, withdrawal limits, and eligibility requirements such as being a current account customer are examples of restrictions.

Savings should "check terms and conditions carefully as some easy-access accounts pose withdrawal restrictions, so it's vital consumers stay within any limits to benefit from the full interest rate on offer," advises Springall.

What is a typical savings account's operation?

Generally speaking, regular savings accounts offer a higher interest rate than easy-access savings accounts. Moreover, regular saver rates are typically fixed, providing you with certainty regarding the interest you earn, in contrast to easy-access rates.

Due to their limitations, they are less adaptable than easy-access accounts. The most typical characteristic of a regular saver is that it establishes a minimum amount that must be deposited into the account each month. The amount you can deposit is also limited, and withdrawals are typically prohibited or restricted (without losing interest).

Additionally, many regular savers require you to be a current bank customer, but not all accounts require that.

It's critical to realize that your regular savings account's interest rate does not guarantee that you will receive the full advertised rate on every deposit.

Only savings deposited for the entire year are eligible for the advertised rate. The first fifty dollars will have been saved for a full year and earn the full percentage if you were paying fifty dollars a month. The second fifty dollars will only remain in the account for eleven months. On that 50, you will thus receive eleven months' worth of the quoted rate. The next fifty will last for ten months, and so forth.

Easy-access as opposed to traditional savings accounts.

Today, the highest-paid regular savers can reach 7%. For current account holders saving between £25 and £300 per month, First Direct is currently offering 7%.

Nevertheless, the way interest is calculated in standard savings accounts does not imply that you will receive 7% of every deposit.

As previously mentioned, this rate is only applicable to savings that are deposited for the entire year.

After a year, you would have paid 3,600 and earned 136 point 50 in interest if you kept up your monthly maximum payments.

If you had a lump sum of £3,600 to save, this is how much interest you would get if you put the money into a regular savings account twice a month.

After being calculated using the monthly balance, the interest is paid once a year.

Based on the assumption that a standard savings account pays 7% interest, the table below shows how the interest on 300 monthly deposits is calculated.

Which would be better for your monthly savings: an easy-access account or a regular savings account?

It is worthwhile to do the math on this as well if you intend to save on a monthly basis and do not have a lump sum.

Is it better to save my money regularly or in an easy-access savings account?

You should ideally consider the rate that each account offers, how much you need to save, and whether you might need to access your money soon.

You can get the best of both worlds by transferring your lump sum to an easy-access account and allowing the maximum to be deposited into a regular saver.

The rate that is offered and whether you require access to the funds will determine whether you plan to save money each month on payday.

Although the figures from the aforementioned examples indicate that you would be better off with a lump sum in an easy-access account, it's important to keep in mind that because ease-access accounts have variable rates, there is no assurance that the headline rate will remain constant.

In contrast, some standard savings accounts provide a fixed rate for a full year, which at least lets you know how much you'll make.

The amount of money saved by various age groups is examined in our article on average savings by age.