It's always advisable to try and put some money aside for a rainy day, so that if you meet an unexpected expense or repair bill you'll be able to cope financially. It's also prudent to save some of your income as an investment for your future, especially in these days of uncertain pension prospects. Many people choose to invest in stocks and shares as over time this is likely to provide the best return, but for the majority of us the security of a bank savings account is more attractive. That being said, what kind of savings account should you choose?

The first kind of account we'll look at is known as a regular saver. With these accounts, you deposit a certain amount every single month. In the past, this amount tended to be fixed at a specified figure, but these days most accounts allow you to deposit an amount within a specified range. These accounts are a good choice for people with no capital but some surplus income, and usually pay a good rate of interest.

The other kind of account is the deposit account, which has no stipulation as to how you pay money into it. You can put in small amounts as and when you can afford it, or you can deposit a large amount when you open the account and leave it there, or a mixture of the two. These accounts come in three basic flavours, depending on how easily you need to get at your money.

Firstly, the instant access type of deposit account places no restrictions on when you can withdraw your cash. Next, the interest penalty type of account will let you withdraw as you wish, but won't pay any interest for the months in which a withdrawal is made. Finally, a notice account requires you to give thirty, sixty, or even ninety days notice before you make a withdrawal, or you'll be hit with substantial interest penalties.

In general, the easier it is to get at your money, the less interest you'll earn. Of course, this will vary from bank to bank, and you might be able to find an easy access account with a better interest rate than a notice account with a different bank, but the general rule holds. For these accounts, you need to trade off the likelihood of needing access to your money against the extra gains you could make by locking it away.

There's one other kind of savings or investment account which takes this idea of access restrictions to the extreme, namely bonds. With these accounts, you invest a lump sum in the account which is then locked away for a specified number of years, with no access at all. In return, you'll either get a preferential fixed interest rate which is much more attractive than normal accounts, a variable rate guaranteed to be better than average accounts over the length of the term, or a return linked to stock market performance with a guaranteed minimum return, These accounts will almost always give the best return out of all the types, but are only suitable for long term investments where you are certain you won't need to access your funds before the term is up.

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