The Building Societies Association's annual campaign, which runs from 21 to 27 September, aims to raise awareness of the importance of savings. Its report also found that just over a quarter have less than £1,000 stashed away in case of an emergency.
For many people, building a savings pot can feel like a daunting task. But you don’t need thousands in the bank to get started. In seven steps, we show you where to begin and what to do once your nest egg has grown.
1. Come up with a savings plan
If you have very little saved already, your first priority should be to build an emergency fund. How much you need to stay afloat in the event that the worst happens will depend on your individual circumstances. For example, you may have a family to support, or health problems that mean you don't have a reliable source of income.
The Financial Conduct Authority recommends having enough money to cover you for three months. If you're retired, however, you may need much more to tide you over – think one to three years' worth.
Building a safety net can feel daunting, especially if money is tight. But starting small and contributing consistently will add up over time. Go through your current spending to identify the things you simply can't live without, and work out what each costs. Then set a target to aim for.
2. Start with an instant-access account
Once you've set a goal, it's time to open a savings account. Instant-access accounts are a great option to start building a pot. They allow you to deposit money whenever you want, and many also let you dip into your pot as often as you need to.
You can often open an instant-access with as little as £1, but make sure you read the small print first. Some deals restrict the number of withdrawals you can make in a year or require you to open a current account first.
Regular savers are another type of account aimed at people who only have a small amount to tuck away each month – typically between £250 and £500. In return, these accounts offer interest rates far higher than most other types of savings product.
Find out more:3. Consider fixing for long-term returns
The downside to instant-access accounts is that their variable rates can rise or fall at any time. Once you’ve built up a sizeable cash pot, it's time to think about moving some of it into fixed-term bonds, which guarantee your rate for the length of the term.
The next question is: how long should you fix for?
Locking your money away in a bond lasting a year or less is smart if you're worried about losing access to your cash for too long. However, putting funds in an account lasting two to five years protects your nest egg from the impact of falling rates and could therefore leave you better off in the long run.
Find out more:4. Switch to a better rate
Always shop around for the best returns, and switch accounts if you find you're no longer getting a competitive rate.
At the very least, you should pick a savings account with an interest rate above the current inflation figure of 3.1%. Anything below that means your money is effectively losing value over time.
The table below shows the top rates available for instant-access and fixed-rate savings accounts, ordered by term.
| Account type | Provider | Account | Interest rate (AER) | Provider customer score | Minimum investment | Opening methods | Interest paid |
|---|---|---|---|---|---|---|---|
| Instant access | Cahoot | Cahoot Sunny Day Saver | 5% (a) | n/a | £1 | Internet | Monthly, yearly |
| One-year fixed rate | Investec Save | Fixed Rate Saver | 5% | n/a | £5,000 | Internet | On maturity |
| Two-year fixed rate | OakNorth Bank | Fixed Term Savings Account | 5.03% | n/a | £1 | Internet, mobile app | On maturity (compounded annually) |
| Three-year fixed rate | GB Bank | 3 Year Fixed Rate Bond | 5.07% | n/a | £1,000 | Internet | Monthly, yearly |
| Four-year fixed rate | Vanquis Bank | 4 Year Fixed Rate Bond | 5.04% | n/a | £1,000 | Internet | Monthly, yearly |
| Five-year fixed rate | Shawbrook Bank | 5 Year Fixed Rate Bond - Issue 57 | 5.25% | 65% | £1,000 | Internet | Monthly, yearly |
| Isa type | Provider | Account name | Interest rate (AER) | Provider customer score | Minimum investment | Opening methods | Interest paid |
|---|---|---|---|---|---|---|---|
| Instant access | Sidekick | Cash Isa | 4.61% (a) | n/a | £1 | Mobile app | Monthly |
| One-year fixed rate | Vida Savings | 1 Year Fixed Rate Isa | 4.8% | n/a | £1,000 | Internet | Monthly, anniversary |
| Two-year fixed rate | Vida Savings | 2 Year Fixed Rate Isa | 4.9% | n/a | £1,000 | Internet | Monthly, anniversary |
| Three-year fixed rate | Vida Savings | 3 Year Fixed Rate Isa | 4.95% | n/a | £1,000 | Internet | Monthly, anniversary |
| Four-year fixed rate | UBL UK | 4 Year Fixed Rate Cash Isa | 3.91% | n/a | £2,000 | Branch, internet, mobile app, postal | Monthly, quarterly, anniversary, on maturity |
| Five-year fixed rate | Vida Savings | 5 Year Fixed Rate Isa | 5% | n/a | £1,000 | Internet | Monthly, anniversary |