Regular savings accounts can be a great way to save for a special event or simply to build your savings over time, allowing you to save gradually rather than depositing a lump sum. Regular savings accounts, also known as monthly savings accounts, have the added benefit of helping you to pick up good savings habits and learn how to save consistently.

The rundown
  • A regular savings account might be a good way for you to save if you don’t already have a lump sum set aside 
  • Regular savings accounts require you to make monthly deposits over a set period of time
  • There are some restrictions with regular savings accounts, such as maximum deposit amounts and missed payment penalties

What are regular savings accounts?

With a regular savings account, you commit to saving a set amount of money each month, usually between £25 and £250. With a monthly savings account, you automate these monthly payments, so you know exactly how much you’re saving and when.

Monthly savings accounts may offer more competitive interest rates than standard savings accounts but are typically less competitive than lump sum savings accounts.

 

What is the difference between a regular savings account and a monthly savings account?

There is no difference between a regular savings account and a monthly savings account. This type of account is called a regular savings account because you save money regularly, and it’s also known as a monthly savings account because you save money each month.

How do regular savings accounts work?

When you open a regular savings account, you commit to depositing a set amount of money each month, typically in return for a higher interest rate than you’d get with an ordinary savings account or a current account.

It’s important that you deposit the set amount each month, as banks can penalise you by lowering your interest rate or charging you if you don’t. Other things to consider include restrictions on how much you can save, when you can withdraw and the agreed time period you’ll get the interest rate for.

Are notice accounts different from regular monthly savings accounts?

Notice accounts are a type of savings account that allows you to withdraw your money at a date of your choosing by giving your bank notice that you want to make a withdrawal. Notice savings accounts provide a mix of the benefits of different types of savings accounts, featuring interest rates comparable to fixed rate bonds and the flexibility of easy access accounts. This type of account is right for you if you want to take advantage of competitive variable interest rates and want to be able to withdraw your money after a set notice period.

What can you use a regular savings account for?

Regular savings accounts require you to make a set monthly deposit over a fixed period of time, making them a great option if you don’t have a lump sum set aside, but would like to get a good amount of money together. 

Once you’ve completed your term, you could withdraw your original deposit along with any interest you’ve earned and spend it on something special, or perhaps re-invest your money as a lump sum into a fixed rate bond or notice account to grow it even more. 

The restrictive nature of a regular savings account makes it ideal if you struggle to save but want to grow a pot of money for a significant purchase, such as a house deposit, your retirement or a wedding.

Who are regular savings account right for?

A regular savings account might be right for you if you don’t have a lump sum to invest but can save a small amount on a monthly basis. It’s also a good way for teenagers and young adults to learn how to save and get into the habit of saving.

If you’re planning for a special event like a wedding or holiday, a monthly savings account might earn more interest than a standard savings account, but it would also be worth considering a notice account which would typically offer a higher interest rate.

What are the benefits of regular savings accounts?

The key benefit of regular savings accounts, and the reason that most people opt for them, is the higher rate of interest you get when compared to other savings accounts. 

Another advantage is that they often run over a shorter period of time, such as 12 months, making them a great option for short-term savings goals such as a wedding or new car. 

Regular savings accounts also restrict your access to your money for your agreed term and limit the withdrawals you can make, which is handy for if you struggle with impulse spending.

What are the key considerations when
opening monthly savings accounts?

Due to the restrictions and requirements providers put in place on regular savings accounts, it’s important to complete your own research. The key considerations outlined below contain important information that might help you with your research.

1. How many regular savings accounts you can open

You can open more than one regular savings account across different banks (some regular savings accounts require you to already have a current account with that bank). A regular savings account is designed for you to save smaller amounts monthly. If you have more to save, you can open more than one monthly savings account.

2. Does this type of savings account meet your savings goals?

The total amount you earn from a regular savings account is likely to be less than you would earn from a fixed rate bond or notice account. This is because you’re saving a smaller amount each month and growing your savings pot, rather than earning interest on one lump sum. Additionally, some regular savers offer variable interest rates, meaning your interest rate may drop during the term of your account.

3. What restrictions the account has

Monthly savings accounts tend to be quite restrictive, such as limiting the number of withdrawals you can make or penalising you if you miss a payment, so be sure to do your research to help you find the best monthly savings account for you.

4. What the term of the account means for your savings

Some regular savings accounts switch to standard savings accounts after 12 months. At this stage, it could be best to switch accounts to one that earns a better interest rate.

5. How much interest you’ll actually receive

The interest you earn at the end of your term isn’t calculated from the balance of 12 months worth of savings, rather, it’s an average of what you save each month, meaning you could end up earning less interest than the headline rate.

How is interest paid on regular savings accounts?

How interest is paid on your monthly savings account will vary, but most banks pay interest annually directly into your savings. It’s always best to check this before you open an account. The interest you earn will also depend on the interest rate and how much you deposit.

How do I make deposits to my regular savings account?

You will typically be required to automate a monthly deposit into your regular saver. The amount you deposit is up to you, but a minimum and maximum deposit will apply and will depend on the account you open. The minimum monthly deposit is usually £10, and the maximum £400.

What happens if I miss a payment?

Monthly savings accounts tend to have strict rules, and fulfilling your commitment to a monthly payment is often one of those rules. If you do miss a payment, your account may be closed or your interest rate reduced. It’s always best to check the small print before you open an account.

Can I make withdrawals from my regular savings account? 

Whether you can withdraw money from your regular savings account is likely to differ between accounts and providers, but most of these types of savings accounts don’t allow you to withdraw money before the end of your agreed term. 

The ones that do may charge you for making withdrawals, so this is something to keep in mind when deciding which regular savings account is right for you.

Are there any restrictions on regular savings accounts?

Regular savings accounts tend to have better interest rates than standard savings accounts, but restrictions apply: 

  • Most monthly savings accounts have low maximum deposit limits to moderate the interest you can earn 
  • Some banks may penalise you if you miss a monthly payment
  • You may be restricted from accessing your money until the end of the term

Do I pay tax on a regular savings account?

Basic rate taxpayers can earn up to £1,000 of tax-free interest on their regular savings account. Higher rate taxpayers can earn up to £500. If you earn more than £150,000, you won’t benefit from this personal savings allowance. However, if you earn less than £16,000 per year, you’re eligible for the zero-tax band, meaning that you don’t need to pay tax for the first £5,000 you earn from your regular savings account.

Is my money protected in a regular savings account?

Yes, the money you deposit in regulated UK banks and building societies is protected by the Financial Services Compensation Scheme (FSCS) up to £85,000 per person, per banking group (or £170,000 for joint accounts) in the event your bank or building society collapses.

What is the best regular savings account?

Typically, the best regular savings account is the one that pays the highest rate of interest. You’ll also need to check the small print to make sure the set term and withdrawal options work for you as well.

How do I find the best regular savings account for me?

To find the best regular savings account for you, first consider your own financial circumstances, how much you have to save and whether or not you will need access to your cash during the agreed period. You can then compare regular savings accounts online, or visit the local branch of your bank to see what your options are.

How can I get the best interest rate on a regular savings account?

To get the best interest rate on a regular savings account, firstly compare different accounts to make sure you’re getting the best advertised rate. When you open your regular saver, you must meet the maximum monthly deposit payments, as this will mean you’ll earn more interest on your savings. This is an important thing to consider when calculating what you will earn on the account. 

How do I compare regular savings accounts?

You can compare regular savings accounts online. Take a look at the most important factors of these types of savings accounts, such as the opening deposit, length of term, monthly deposits and the rate of interest. 

What should I consider when I compare regular savings accounts?

To make sure your chosen regular savings account is right for you, you should keep in mind the key considerations that we explored when it comes to regular savings accounts, including:

  • How many regular savings accounts you can open
  • Whether this type of savings account meets your savings goals
  • Any restrictions the account has
  • What the term of the account means for your savings
  • How much interest you’ll actually earn 

What are my options once I've built up
my savings in a monthly savings account?

Aside from withdrawing your savings to pay for something special, you could use the money you’ve saved to make a lump sum deposit into a fixed rate bond or notice account, where you can earn a better rate of interest.

If you want to open a lump sum savings account through our marketplace, ICICI Bank (UK) offers 0.60% AER variable for 95 days with a minimum investment of £1000. You could also consider FCMB Bank (UK) Limited at 0.75% AER fixed for 3 years with a minimum investment of £1000.

Regular Savings Accounts FAQs

How do I choose the best regular savings account for me?

The best way to find a regular savings account that works for you is to first set out your budget, savings goals, expectations and whether or not you’ll need access to your money during the term of the account. Once you have all of that information, you can compare regular savings accounts online or in-branch. 

Can you have more than one regular savings account?

Yes – you can open more than one regular savings account with different banks, however some providers require you to have an existing current account with that bank. 

Are regular savings accounts protected by the FSCS?

Money you deposit into banks and building societies that are UK-regulated is protected by the Financial Services Compensation Scheme (FSCS). This covers up to £85,000 per person, per banking group (or £170,000 for joint accounts) in the event your bank or building society collapses.

How much money can I deposit in a regular savings account?

There is often no limit on the initial deposit that you can open a regular savings account with, but many providers do have a limit on how much you can deposit each month, such as £250.

How does Raisin UK work?

If you want to quickly and easily open fixed rate bonds or notice accounts with attractive rates from a range of UK banks, register for a Raisin UK Account and log in to apply. It’s free to open an account, and once you’ve been approved, all you need to do is deposit your lump sum and watch it grow.

If you have any further questions, our UK-based Customer Services Team will be happy to help.

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