Students often don’t think about savings, but having a savings account can help encourage good habits for later in life, but more importantly can help you tuck money away for summer holidays or special purchases.
Rob Saunders, Head of Money at comparethemarket.com, talks us through his advice for students who are looking to open an account.
"The first thing to consider is how long are you saving for, are you using a savings account as a way to keep some money separate for summer holidays or are you planning on saving for the long run. This will help when picking what sort of savings account you want, if you want to save money over a short period of time and want to be able to access the funds whenever you like, then you should look at an “instant access savings account”. If you would like to save for the next year, two or three, even, consider a fixed rate bond or cash ISA which will often given you a higher rate of interest, but may mean than your cash won’t be as accessible.
"With a Cash ISA there might be a minimum amount of time before you can access your cash and penalties if you access it beforehand. But on the flipside, a Cash ISA is a type of account which enjoys tax free status, which means that you will not pay tax on any interest gained on your balance.
"A big factor in deciding which account to pick will be the interest rates on offer. Instant Access Accounts will have around 1.5% AER. AER stands for Annual Equivalent Rate, which means the rate of interest you can receive on your savings on a yearly basis.
"Some accounts will give you the option of having interest paid on a monthly or yearly basis, if you’re only saving for a short period of time, like in the run up to summer holidays, consider having interest paid monthly.
"When researching accounts make sure you check if it has a minimum or maximum account balance. You can open most savings accounts with only £1, but there are some that will require that you deposit anywhere up to £1,000 as a minimum. Also be aware that some have upper limits also, some as high as £1million, and others as low as £3,000. It is sometimes the case that the accounts with higher interest rates will also have a higher minimum deposit.
"And finally, but crucially make sure you have the access you want to your cash. Those accounts with a higher level of interest can try and make it harder to get to the cash.
'Generally there are four ways of getting at your cash, they are: in your local branch, over the telephone, on the internet or by post. Check which methods are available to you before you open your account, so that you aren’t stuck trying to find a branch or posting off forms when you need instant access to the account."