Regular Savings and your Household Budget
Regular savings are savings made on a regular basis into a bank or building society account. These savings are different from savings made into a current account or an ordinary savings account.
Regular savings in detail
Regular saving accounts require a monthly investment of between £10 and £500. Typically, the term of these accounts is fixed at one year, and they require certain number of minimum, usually 10 or 11, payments.
Interest rates and withdrawal options for regular savings
Regular savings accounts offer higher interest rates when compared to other accounts. Interest rates can be fixed or variable. Some accounts have limits on withdrawal amount, and some don't allow to withdraw any money until the end of the term. Interest rates are reduced in case of early withdrawals or by missing a regular payment.
Example 1 - First Direct
First Direct's regular savings account offers a fixed AER of 6% for the first 12 months. This account is exclusive only to customers of First Direct 1st account current account. You can make deposits of between £25 to 300 per month. This account does not allow early withdrawals or missing of any payments; in case you do so, the account is closed, and you will get an interest rate of only 0.5% on whatever you have deposited.
Example 2 - HSBC
HSBC offers an AER of between 4 to 6% depending on your HSBC account type. You can make a monthly deposit of £25 to £250 each month. This account is for 12 months, and it does not permit any partial withdrawals. In the case of any early withdrawals, you will get interest of only 0.04 to 0.08% depending on your account type.
Example 3 - Saffron Society Building Account
When it comes to building society accounts, Saffron Society Building offers a gross AER of 4%. The account requires 12 monthly payments of £10 to £200. To be eligible for this account, you need to have at least £100 with the society for minimum 12 months. This account allows a withdrawal option as long as you maintain a minimum account balance of £10. If the balance amount goes below £10, you will only get a gross AER of 0.05% till the time the account balance is under £10.
Regular savings as part of household budget
As per a 2013 report, only one-fourth of British households saves on a regular basis. This is not ideal as savings are always useful, especially in the event of unforeseen crises. Regular savings reduce the money available to fund household expenses, however can be rewarding in the long term. It is good to get into the habit of regular savings, even if the amount is small.
Use our household budget calculator to see how regular savings impact your household budget.