...a saving account?

There is an enormous choice of saving accounts (or deposit accounts) available at any one point in time so, don't be tempted to save with your current account provider unless they can offer you a really good rate of interest. Historically, most people tend to open a current account with one of the well known high street banks. However, you will generally find that building societies offer better rates of interest for savers.

Deposit accounts broadly fall into one of two main categories: the instant access type - which means you have immediate access to your money whenever and as often as you like or, the notice period type - which means access is limited by nature of the fact that you have to give them notice of withdrawal (30, 60 and 90 day periods are common) and you may also be limited by the number of withdrawals you can make over a fixed period.

In reaching a decision about which type of account to choose, you should measure the benefit of a higher rate of interest against how often you think you will need to take money out. In the past, instant access accounts tended to pay very low rates of interest but, nowadays, it isn't difficult to find these types of account paying almost as much as notice accounts.

As with most things in life, it pays to shop around and the best place to find out who is paying the best rates is to go online and use one of the various money comparison web sites or, to look in the personal finance section of the daily newspapers. A word of warning… always read the special terms which apply to the account. Sometimes a rate may look very attractive but, it is only valid for a promotional period, after which time the interest could drop back quite sharply.

You'll also find that many of the highest rates of interest are for accounts which you can only access via the internet. If you want the luxury of being able to withdraw your money the same day, from a local branch, find out which building societies are based in your town and compare the accounts they are offering.

One other type of savings account is the fixed term (or bond) account. These tend to pay the highest level of interest but, they also require you to tie-up your money for periods of typically between 12 and 36 months. You need to be very sure that you won't need access to the funds during that period… or the penalty will very likely be a high one! You are also taking a small gamble that interest rates won't go up during the period in question.

TOP TIP: look out for accounts that guarantee to track changes in the Bank of England base rate (ie. that will pay interest on your savings at say 0.5% below base rate) as these accounts save you the trouble of having to continually check on whether your money is continuing to accumulate at a healthy rate!