how to make your savings work harder

We're here with some handy savings advice, information on the best accounts to use and tips to secure a better financial future.

Rate this content

Saving money might seem straightforward to some people, whereas others may find it difficult to know the best approach.

From the types of savings accounts to your personal tax allowance, we’ll share helpful information for these important questions to help maximise your savings potential.   


what's a personal savings allowance?

The personal savings allowance (PSA) is a tax-free threshold allowing savers to earn interest on savings without taxation. Your allowance is based on your income tax band and its rate: 

  • Basic rate taxpayers (20%): Up to £1,000 in savings interest annually is tax-free. 

  • Higher rate taxpayers (40%): Up to £500 in savings interest annually is tax-free. 

  • Additional rate taxpayers (45%): No tax-free savings interest.   

The PSA applies to all savings accounts other than ISAs (cash and lifetime ISAs), which are tax-free. For more information on these, carry on reading below. 

what are the different types of savings accounts? 

New to saving? Here, we’ve compiled a quickstarter guide to the types of savings accounts available, with balanced information, so that you can make an informed decision about your savings.  

Please always check with your bank and/or financial experts if you’re uncertain about your savings.   

regular savings account 

with a regular savings account, you need to deposit a minimum amount into the account each month for a fixed period. 

  • This can be a good way to build healthy savings habits with sustainable monthly deposits, and they tend to offer higher interest rates than other accounts. 

  • However, you may not be able to deposit large sums of money; therefore, the yields will not always be high in real terms.

easy access savings account 

An easy-access savings account does what it says on the tin; you can deposit and withdraw money at short notice, with no penalty. 

  • If you need flexible deposits and withdrawals, this account can be useful. An example would be an emergency cash fund for unexpected expenses.  

  • These tend to offer lower interest rates.

notice savings account 

This is a savings account where you have a specific notice period before withdrawing. 

  • A useful account for those who are saving towards a goal, like a planned holiday, and don’t need as much flexibility with their savings.  

  • These tend to have slightly higher interest rates. However, penalties may be charged for short-notice withdrawals.

fixed-term savings accounts 

  • These accounts let you save money for a set amount of time with a fixed interest rate that doesn't change. If you know you won't need to withdraw any money for the duration of the account, a fixed-rate account could be worth considering.

cash ISAs  

Cash ISAs, also known as Individual Savings Accounts, are a form of tax-free savings accounts.  

  • With this account, you can save up to £20,000 tax-free each year. This is ideal if you have large sums of money to save in a 12-month period. Many of these cash ISAs are also instant access.  

  • It’s worth noting that you can only have one cash ISA account in any given tax year.  

Lifetime ISAs (LISA)

A Lifetime ISA is specially designed for those who are saving towards their first home or retirement. These are also a form of tax-free savings accounts. 

  • Lifetime ISAs allow up to £4,000 tax-free savings each year. You will also receive a 25% government bonus (up to £1,000) every year that you save.  

  • To receive the 25% bonus, the money must be used exclusively for buying a first home or for retirement. 

  • Like cash ISAs, you can only have one Lifetime ISA in any given tax year.  

how do I choose between the savings accounts? 

There is a range of different savings accounts to choose from, and the best will depend on your personal savings goals and financial situation. Here are some questions to consider when opening a savings account:  

  • Will I need this money in the near future? Or can it be locked away for a longer period of time?  
  • Do I have a strict deadline for saving this money? Do I need to be able to save large amounts at a time?  
  • Am I just starting my savings journey or building on existing savings?  

Once these questions are answered, you can find and compare the perfect savings account for your needs. Generally, savings accounts with higher interest rates will have less withdrawal flexibility. You can compare saving on comparison sites such as uSwitch.

The main consideration when opening a new savings account is ensuring you’re clear on all the account terms. This way, you can protect yourself and your money from surprise notice periods or minimum deposits that you can’t afford. 

how much should I have in savings? 

There’s no hard and fast rule with your savings. You’ll see many financial experts recommend at least three months’ worth of salary saved in case of unexpected expenses like a failed MOT or a broken TV. But, of course, this won’t work for everyone and building up this emergency fund can take time.  

If your essentials, like rent, bills, and food, take a large portion of your salary, you might not have as much left over to put into savings as you’d like. Whatever your financial situation, it’s important to find a sustainable balance that suits you. You can find out more about this in our budgeting 101 guide

Remember, everyone’s financial journey is unique, and you shouldn’t feel pressure or judgment for how yours is going. To learn more about savings and other personal finance topics from dedicated financial experts, listen to our podcast – The Cash Conversation.   

If you’re concerned about your financial health or looking for further advice, we’re here to help. Our friendly support officers are always available to help you manage your financial, mental, and physical health. All our services are free and strictly confidential.