Best savings accounts 2021
Forget sticking your money under the mattress and hoping for the best – if you want the biggest bonuses, you need the best savings account. Here are the smartest ways to save.
While we can't promise you'll be rich by the end of your first term, a high-interest savings account can earn you free money on any spare cash you might have.
Interest rates in the UK may not be at their best right now, but something is better than nothing – and, as some accounts only need a £1 deposit to open, you don't have to wait until you're earning big money to get started.
So whether it's money from a part-time job, birthday cash from your folks or Student Loan leftovers, you can put it to good use with these savings accounts.
What's in this guide?
Things to do before opening a savings account
Before you decide which savings account to go for, there are five important things to think about:
Work out what sort of saver you are
Be realistic about the kind of saver you are. Are you someone who struggles to stick within budgets and often needs to dip into emergency funds, or can you afford to stash some cash away and not touch it for a few years?
Get too ambitious at this stage and you could end up losing all your interest if you have to withdraw early, so it's important that you're honest with yourself before choosing which account to go for.
Make sure your savings are protected
Thanks to the Financial Services Compensation Scheme (FSCS), any money (up to £85,000) you put into a savings account will be protected if everything goes down the pan at the bank which holds your money.
You'll get your money back within seven days if the bank goes bust, and the process is automatic so there's no need to claim.
So whichever bank you pick, make sure they're backed by the FSCS.
Don't get taxed on your savings
The 'savings starter rate' means that you don't have to pay tax on your savings' interest until your total income (of your salary and interest) is £5,000 above the income-tax threshold of £12,500 (so £17,500).
As your first £1,000 of interest on savings is also tax-free, you won't need to pay tax on your savings until the combined income of your salary and interest is over £18,500.
Note: If you have a higher Personal Allowance (e.g. you receive the Blind Person's Allowance), your minimum total income before paying tax on savings will be adjusted accordingly above £18,500.
Most students won't earn enough interest in the year to get taxed on their savings, but that doesn't stop banks automatically nipping the tax off before paying interest – make sure you watch out for this.Stumped when it comes to tax? Our guide to tax facts for students has the answers.
Try an automatic savings app
If you struggle to commit to saving cash regularly, it's worth looking into an automatic savings app.
You'll need to give these apps access to your bank account, but once you do, they'll be able to assess your incomings and outgoings and save an appropriate amount of money accordingly.
This cash will go into a virtual savings pot and is only meant to be as much as it reckons you can afford at that time – sometimes a couple of quid, sometimes the price of a meal, depending on how much its software has calculated you can spare.
You can find the best automatic savings bots and apps in our guide.
Consider switching account for more interest
Some easy-access savings accounts tempt you in with generous interest rates that include a one-year bonus, or a variable rate that can plummet faster than the pound after the Brexit vote (ha... politics).
Being savvy with your savings is all about staying in the loop. Keep an eye on interest rates, because unless you go for a fixed-rate option, these will fluctuate. And, if you find a better rate elsewhere – switch!
Make sure you keep an eye out and switch when the rates drop (bookmark this page so you can come back to it when it's time to find a new account).
It's your money, so make sure you're getting the most from it.
What kind of savings account should you get?
There are loads of savings accounts to choose from, and each one has its own benefits.
Note that if you're earning £17,500 or more a year, you'll pay tax on any interest you earn above £1,000.
If you're not working, or your total taxable income for salary and interest is below £18,500, you won't pay tax on savings at all. Keep an eye on this, and if the bank accidentally taxes you when you're earning below that amount, make sure you claim for a refund.
If you're worried about getting taxed on your savings, an ISA would be your best bet. More on this below.
Main types of savings accounts
These are the main types of savings account:
- Easy-access savings accounts – You can withdraw money straight from the account with no notice, but tend to get stuck with lower interest rates in return. Easy-access savers are a good option for those who don't have loads of cash to spare, but want to make a bit extra without locking away emergency funds.
- Fixed-rate savings accounts – These accounts offer a slightly better rate of interest, but you'll usually need to fix your money in them for anything from three months to five years. Fixed-rate savings accounts often have a higher minimum deposit amount, and in most cases withdrawing money early means you'll forfeit the interest.
- Current accounts – Some current accounts come with a savings account as part of the package – we've got the best picks below.
- Cash ISAs – All interest from savings in ISAs are tax-free. You can deposit up to £20,000 into ISAs each tax year, either into one account or by splitting the amount across multiple ones (if you happen to have £20,000 to put away). ISAs can be good long-term approaches to saving – the top options are covered in our guide to the best ISAs for students.
- Lifetime ISAs – Also known as a LISAs, these accounts could give you up to £1,000 in free money every year if you use them to purchase your first house (or for retirement). Start saving now to get the maximum bonus.
The main decision you need to make at this point is: will you need access to your savings instantly, or can you bear to lock them away safely for a year or more to earn some decent interest? If the latter, you can get better rates with a fixed-rate savings account.
Best easy-access savings accounts
Easy-access accounts (sometimes also known as instant-access accounts) generally pay reasonable interest rates. Although some limit the number of withdrawals you can make each year, you don't have to wait fixed periods of time to take out money.
Another major bonus is that they tend to have low minimum deposit amounts. Just make sure to ditch and switch when bonus rates disappear after 12 months.
These are the best easy-access savings accounts:
Minimum deposit: £1
Access: Apply and access via app
Other info: Bonus only paid on the first £5,000 in the account, and you must use the exclusive code on the link below to sign up.
When you sign up, you'll be put on the Chip AI plan which charges you £1.50 every 28 days. If don't want to pay for your account, you can switch to the free ChipLite plan which only pays 1.25% on balances up to £2,000.
If you're unsure whether or not to pay for the extra interest, it's simply a case of how much you're planning to save – if it's more than £3,575 a year, you're better off paying for Chip AI as the extra interest makes up for paying the fee. Any less, and it's best to stick with ChipLite.
Atom Bank Instant Saver (0.5%)
Minimum deposit: £0
Access: Apply and access via app
Aldermore Easy Access Account (0.5%)
Minimum deposit: £1,000
Access: Apply and access online
Best fixed-rate savings accounts
If you can afford to put some money away for a while, you'll make the best interest on your savings with a fixed-rate account.
Just make sure you can actually afford to stow this cash away – some banks will take away your interest completely if you withdraw early, or even charge you a fee.
We recommend these fixed-rate savings accounts:
Atom Bank One-Year Fixed-Rate Savings (0.6%)
Minimum deposit: £50
Interest paid: Monthly or at maturity.
Access: Apply and access via the app.
Secure Trust Bank Three-Year Fixed-Rate Bond (1.01%)
Minimum deposit: £1,000
Interest paid: Annually
Access: Apply and access online.
Best combined current and savings accounts
If you're sensible with your cash – and self-disciplined enough to have your savings sitting in your current account – you could earn double the interest than a traditional savings account can provide by choosing a current account with an attached savings pot.
The only condition is that you usually need to pay in a set amount every month to these accounts, ranging from £500 to £1,750. This could be from a part-time job, your Maintenance Loan or parental support, but for the average student, this would probably still be a challenge.
However, if you do happen to have a chunk of savings in an easy-access savings account you could set up a standing order to deposit cash from there each month so you benefit from the higher interest – and remember, you can transfer money out of these accounts whenever you need it!
Nationwide FlexDirect (2%)
Minimum you have to pay in each month: £1,000
Interest rate: 2% AER fixed interest on balances up to £1,500 (no interest paid on anything above that) for the first year
Extra info: You need to deposit at least £1,000 each month to retain the rate, and not from another Nationwide personal account. And after 12 months, the interest rate will drop to 0.25%.
Virgin Money (2.02%)
Minimum paid in each month: No minimum
Interest rates: 2.02% AER variable interest which is paid monthly on your current account balance up to £1,000 (no interest paid on anything above that). The current account is linked to an instant-access savings account that has 0.5% AER variable interest on your balance, paid quarterly.
Already thinking about saving for your first home? The Lifetime ISA could see you benefit from a 25% bonus from the government.