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Types of savings accounts

You are thinking about opening a savings account. Maybe you want to set a certain amount aside each month. Perhaps money is available from your employee savings account, or maybe you have received aninheritance, a Christmas bonus or your holiday allowance. You can use the money to save for a particular purpose, or as insurance against unexpected expenditure.

There are many different ways to save. You should therefore ask yourself:

  • When will I need the money?
  • What am I saving for?

A number of different types of savings accounts are explained in the menu.

Longer commitment, higher interest rate

Saving simply means putting money away for a later date. This later date may be in the near future or a couple of years or even longer away. If you tie up your savings for a longer period, you will usually receive a higher interest rate.

Can you withdraw the balance free of charge?

You can put your money in a savings account to which it is 'committed' for a certain period. This means that during this period you are either not allowed to withdraw any of this money, or you must pay a penalty if you do so.

In return, the bank will normally offer you a higher interest rate than on an account where you can withdraw the balance free of charge (i.e. an account from which you can withdraw money at any time without having to pay a penalty).

In other words, the way in which you wish to save will depend on when you need your money as well as on the purpose for which you are saving.

Current account or savings account?

Of course, you can build up savings in a normal bank or giro account (also known as a current account). The advantage here is that you can withdraw your money free of charge and that you are not running any risks. The disadvantage is that normally you will earn very little or no interest on your balance.

Another point to remember is that most banks offer different types of savings account, where you receive interest on the outstanding balance. The interest depends on the amount of the balance. Some savings accounts impose restrictions on withdrawals.

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