Best student savings accounts

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By in Student Banking. Updated August 2016.

Students aren’t exactly renowned for being the richest folk, but there is nothing to say you can’t buck the trend.moneybath While we can’t promise bathtubs full of dollar by the end of your first term, having a high-interest savings account will earn you money on any spare cash you might have.

Whether you’re squirrelling away money from a part-time job, are lucky enough to have got some financial donations from family or just have some leftover from your loan or overdraft, make sure you put it to good use.

Whatever you do, do not stick it in your basic 0-0.1% interest student account! Otherwise you are potentially losing the value of your money, as inflation is between 1% and 3%. Earn on it instead!

Some 53% of students already have a savings account, and all it could take is a £100 deposit and you could be earning up to £5 on that over the year. Obviously the more you save, the more you gain in interest.

What savings accounts should students go for?

There are lots of savings accounts to choose from and each of them have their benefits. In this guide, we will cover the easy-access accounts as well as fixed-rate accounts. Here’s is a quick summary of the best savings accounts for students.

  • Instant access savings accounts – This is one of the most popular for students. You can withdraw money straight from the account with no notice, but in return, it usually offers lower interest rates. It’s great for those who don’t have loads to spare but want to make a bit extra.
  • Fixed savings accounts – These accounts offer a slightly better rate of interest, but it means that you will have to fix your money in them from three months to five years. Some of them also have a minimum deposit amount. Withdrawing money means you forfeit the interest in most cases.
  • Cash ISAs – A cash ISA allows you to save your money completely tax-free. Even though most students don’t reach the threshold for tax anyway, it means you could be better off for saving in the future. In 2014/15, you can save £15,000 in a cash-only ISA.

Best savings accounts for students

The main decision you need to make at this point is this: do you need to access any savings instantly, or can you afford to put it away for a minimum of one year without worrying about it? If you’re able to do this, then the best rates can be found with fixed savings accounts.

This section has the best instant access savings accounts for students. They have a reasonable interest amount for the first year and allow you to access your money instantly. Even better, they have a very low minimum deposit amount.

Due to the highly volatile state of the financial market, banks are changing their interest rates almost monthly which means that this article will be updated as much as possible to keep up with the available rates. Please double-check with the websites by following the links.

Here are the current top two:

  1. The Post Office Online Saver – 0.9%

    postofficephoneMin deposit – £1

    Access – Online

    Withdrawals – Unlimited

    Extra Info – Not only do you get unlimited withdrawals on this account, you can also choose if you want your interest paid monthly or annually. The rate will drop after 12 months though, so it might be worth switching after a year.

    More Info »


  2. Halifax Online Saver – 0.9%

    Halifax fixed student saverMin deposit – £1

    Access – Online

    Withdrawals – Unlimited

    Extra Info – This account comes with top customer service, as well as instant access all year round. Just be aware, as with most instant access accounts, that the interest will drop down to 0.2% after the first year, but you can just switch.

    More Info »

Have you considered a current account?

If you’re super sensible with your cash – and are self-disciplined enough to have your savings sitting in your current account, you could earn double (or even treble) the interest that a traditional savings account can provide.

The only condition is that you must pay in a set amount every month – ranging between £500 and £1,500. This could be from your part-time job, student loan, or parental support. If you don’t have a consistent source of income, you’ll be better off with an instant access savings account.

Here are the current top two:

  1. Nationwide FlexDirect – 5%

    nationwideMinimum paid in each month – £1,000

    Access – Online

    Withdrawals – Unlimited

    Extra Info – For 12 months, you can get a cool 5.00% interest on balances between £1 and £2,500. After this, it drops to 1.00%. This is considerably higher than what most savings accounts offer – and it’s relatively easy to switch if you’re with another bank.

    More Info »


  2. Santander 1-2-3 Account – Up to 3%

    santander_student_Bank_AccountMinimum paid in each month – £500

    Access – Online

    Withdrawals – Unlimited

    Extra Info – You get 1% interest on balances of £1,000 or more, 2% on balances of £2,000 or more, and 3% when you’ve saved between £3,000 and £20,000. You need to pay in £500 a month, and this cannot be from another personal Santander account. There’s also cashback on purchases, and the monthly fee for the account is just £2.

    More Info »

Best fixed-rate savings accounts for students

If you can afford to put a little bit of money away for a while, then you can make the best interest on your savings with a fixed account. Just make sure that you can afford to stow this cash away for the time you choose, and will not need it as a back up.

Some banks charge for you to take it out early – or may take away your interest. Also, be aware that the interest shown below is the maximum!

Here are the current top two:

  1. Halifax Fixed Saver – Up to 2%

    Halifax fixed student saverMin deposit – £500

    Withdrawals – Depending on your account, one to five years

    Extra Info – The amount of interest you receive per year depends on how long you’re willing to save your cash for. A one-year term gains you 1.4% on your cash. This rises to 1.6% for two years, 1.75% for three years, and 2% for five years.

    More Info »


  2. Skipton Fixed Rate E-Bond – Up to 2.1%

    Skipton Building SocietyMin Deposit – £500

    Withdrawals – Depending on your account, one to five years

    Extra Info – Withdrawals are not permitted – however, you can opt to have your interest paid monthly at a lower rate than the 1.3% on offer. Like the Halifax account, there are bigger rewards if you stow your cash away for longer. You get 1.6% for two years, 1.8% for three years, and 2.1% for five years – making it the better choice for long-term savings.

    More Info »

Getting the most from your savings

If you are a savings newbie, then you may be slightly confused about what is going on with student savings accounts. The truth is that there is no such thing as a student savings account, but there are ones that work better for the student market.

Our top finance researchers have not only found you the best savings accounts on offer, but also beavered away to bring you some top tips on savings accounts.

Up to £85,000 Protected

money-safeLuckily, anything you put into a savings account will be protected up to £85,000 if the bank crashes. This is thanks to the Financial Services Compensation Scheme (FSCS). They pay your money back within 7 days if the bank fails and the process is automatic (no need to claim).

If you are lucky enough to have over £85,000 to put into savings, then it is best to split the money so that you are protected instead of putting it all in one and risking losing some.

Know your access time

You need to know when and how you can access your money. If you are someone who does not budget well and may need money in case of an emergency, then you will definitely need to go with an instant access savings account.

Obviously, fixed rates accounts are the best for the largest rates but you need to be sure that you can keep the money in them for one to five years without touching it. If you remove any money early you may be fined or lose your interest so check the small print on your savings account.

Don’t get taxed

taxmanTo get taxed on your savings your interest plus your earning will need to exceed £10,000 per year. Obviously, this is quite rare for most students. However, many major banks automatically pay the tax on your savings account and you don’t want this to happen.

To make sure that your savings are not taxed, you need to fill out an R85 form and hand it into your bank. Alternatively you could take out an ISA which will mean that your money is fully tax protected.

Use your savings account as a budgeting tool

If you are not very good with spending money that is in your current student bank account, then you can actually use a savings account as an extra way of saving.

If you draw up a budget and see that you have £100 of disposable income a month, then it would be worth putting this into a separate savings account. This means that not only will it gain interest, but you will also have to ask yourself if you really need it before transferring it.

Switch for more interest

Money_Sterling4_452x339_210512Make sure that you know the rate of interest and for how long it lasts for. For example, with some of the instant access savings accounts you will only get a one-year bonus. This means that you will need to switch to another account after a year to keep your savings at a maximum.

Remember, many of these rates are variable and will change over the course of time. Keep an eye on what you’re getting and keep up with the latest market leaders. Sometimes, the savings providers entice new customers with an attractive high rate of interest, only to drop it a few months down the line. So beware! Switch again if you have to.

Please leave a comment with your own saving experiences as a student, and post any questions you might have!

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5 Responses to “Best student savings accounts”

  1. susanna

    04. Sep, 2016

    It seems the 3% interest rate at Santander ends 1.11.16.?.. but ta for the info!

    Reply
  2. shannon

    18. Aug, 2016

    Hi guys,

    Thanks for the information but these figures could use updating :/

    e.g. The post office saver is now 0.9% in the first year 🙁

    Reply
    • Jake Butler

      22. Aug, 2016

      Hi Shannon, thanks for the heads up. We will look to update this ASAP.

      Reply
  3. barrie

    01. Dec, 2014

    I think it would be a good idea to have a date at the start of the article. I don’t know how up-to-date the informations is without a date.

    Reply
    • Owen Burek

      02. Dec, 2014

      You’re right Barrie, we’ll get this up!

      Reply

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