Navigate the regular saver maze

OPENING a regular savings account is one of the easiest ways to get into the savings habit — and they typically pay the best interest rates, too.

As a rule of thumb, you should have three to six months’ worth of income put aside, in case you lose your job or face an unexpected large bill.

Yet a Government report just last month revealed that more than ten million adults have less than £100 tucked away.

Drip-feeding cash into a regular savings account each month can help you to quickly build up a safety net. Available from banks and building societies, these accounts typically run for a year.

The two main things you need to know are whether you can touch the money during the 12-month savings period and what happens to your cash afterwards.

With most regular savings accounts, you need to move your money at the end of the term. If you don’t, most will dump your cash into an easy-access account paying virtually no interest. Some will let you take money out during the year, but carry on saving, earning the top rate. Others will only give you access if you close the account and cut your interest rate to a pittance.

To get a rough idea of how much to expect at the end, tot up the amount you hope to save. Then divide the interest rate by two and apply this figure to your total yearly savings.

With Virgin Money Regular Saver, you earn a fixed rate of 3pc on between £1 and £250 a month. You can take money out at any time. If you save £100 each month for the year, you’ll end up with around £1,218.

Saffron Building Society’s Regular Saver is similar, but has a higher rate of 3.5 pc on up to £200 a month. If you save £100 a month, you’ll build up £1,222, including £22 interest.

You may find your current account provider gives a better rate of return.

First Direct’s Regular Saver, available to its 1st Account holders, pays 5pc fixed on savings of between £25 and £300 a month. If you save the maximum £300 a month for a year, you’ll end up with £3,697, including £97 interest. Save £100 a month and you’ll have £1,232, including £32 interest.

You can’t take money out during the year. And if you close the account, your interest rate will drop to 0.15 pc.

M&S Bank offers a similar deal, also paying 5 pc, but only on up to £250 a month.

HSBC — which owns both First Direct and M&S Bank — also offers the scheme, but pays either 3pc or 5pc, depending on which of its current accounts you have.

Halifax’s Regular Saver, paying a fixed 2.5pc, is open to all savers, rather than just its current account customers. You can’t make withdrawals during the year, but you can close the account.

Some banks and building societies offer variable rate accounts, which means the rate can change at any time.

At Kent Reliance, the rate is currently 3 pc, Yorkshire BS 2.5 pc and Leeds BS 2.3 pc.