What to do with savings

If you have savings but aren’t yet sure what to do with them, it’s worth considering a variety of options so you can find the best place for you to save money. Be careful about the savings accounts you choose. Before fully committing to anything, it’s worth consulting an independent financial adviser or at least doing some thorough research to ensure that you fully understand the terms and risks of any financial account. 

On this page, we look at what you should consider when you’re thinking about what to do with your savings, the UK’s best places to put savings and how to find the best savings account for your needs.

You’ve got some cash saved up, and now you’re wondering what’s the best thing to do with the money in savings. Before deciding what to do with your savings, take a moment to consider your answers to these questions to ensure you’re growing your savings effectively:

1. What are your savings goals?

If you’re wondering, “Where should I put my savings?”, it can help to first identify your savings goals and have a savings target in mind. It’s important not only to think about what to do with your savings now, but also to think about how much you could save, and how regularly, going forward. 

Whether you’re saving for retirement or a special occasion such as a wedding or a once-in-a-lifetime holiday, knowing what your goals are can help you determine what to do with your money. For example, if you’re saving for a wedding, you’ll probably want to look at short-term savings accounts that give you access to your savings when you need them, whereas if you’re saving for retirement, you might want to lock a lump sum of money away to grow over a longer term.

2. Do you have debt?

Before deciding the best thing to do with savings, a key consideration is clearing your debts, especially if they’re expensive, high-interest debts. This is important because you might be charged more in interest on your credit card or loans than you’d earn from your savings or investments. You could focus on clearing your debt by listing your outstanding debts and working out which is the most expensive, and consider paying that off first. You might even want to consider paying your debt off with your savings, as the earlier you repay your debt, the easier and quicker it will be for you to grow your savings. Beyond benefits to your savings, paying off your debt promptly also brings peace of mind, and puts you on a path to healthy financial wellbeing.

3. Do you have an emergency fund?

Having an emergency fund is an important consideration when deciding what to do with savings. It gives you a safety net that can cover sudden or unexpected costs, such as a broken boiler or a car that fails its MOT, and can help you avoid incurring debt. An emergency fund can help you deal with this type of unforeseen expense and may make it easier for you when life gets a little challenging.

When growing your emergency fund, you may want to consider how quickly you’ll need access to it, as this will determine what type of savings account you use. For example, you might want to open an instant or easy access account, which offers the flexibility of accessing your money quickly and easily.

4. Might you be better off overpaying your mortgage?

If you’re deciding what to do with spare cash, you might want to consider whether to pay off your mortgage early or save. Is the interest rate you’re paying on your mortgage higher than the interest rate you could earn from a savings account? It might be best to pay off your mortgage first. If you decide that paying off your mortgage is the best thing to do with your savings, it’s important to check with your mortgage provider to see if you’ll incur any overpayment penalties.

5. Will you need access to your savings?

Different types of savings accounts offer different levels of access to your savings. If you think you’ll need to access your savings quickly, it’s best to save money into a flexible account, such as an easy access account, that will allow you to access your savings whenever you need to.
If you can lock a lump sum of money away, a notice account or a fixed rate bond may be a better place to put your savings. Notice accounts offer the benefit of some flexibility, as you can access your savings after a set notice period, usually between 30 and 90 days. Typically, the longer you can lock away your money for, the higher the interest rate you’ll earn.

There is no “best place” to put your savings, just as there’s no such thing as a one-size-fits-all approach to personal finance. Only by considering what best suits your needs will you determine where the best place for you to save money is. That said, if you’re not sure what to do with your savings, these are some of the most popular ways to save money in the UK:

1. Fixed rate bonds

Fixed rate bonds could be one of the best investment options in the UK if you want a risk-free place to put your savings, and you have a lump sum of money you’re willing to lock away, typically for between six months and five years. Fixed rate bonds generally offer competitive fixed interest rates, so you’ll know how much you’ll earn when your account matures. Having this guarantee is a worthwhile consideration, especially in times of low interest rates and market uncertainty. 

Bear in mind, however, that fixed rate bonds are only risk-free if they’re protected by the Financial Services Compensation Scheme (FSCS). Many aren’t so it’s important to check with the provider before opening an account. At Raisin UK, we want to keep your savings safe, so we’ll only let you deposit up to £85,000 per person, per banking group. This means your full deposit amount will be protected in the event the bank becomes insolvent and fails.

2. Notice accounts

A notice account is a type of savings account that offers the flexibility to withdraw your money after a set notice period, usually between 30 and 90 days. Notice accounts strike a balance between easy access accounts and fixed rate bonds, offering competitive variable interest rates that typically outperform easy access accounts and greater flexibility than fixed rate bonds.

3. Easy access savings accounts

If you’re looking for a more flexible savings account, an easy access account might be the best place for your savings. This account allows withdrawals as needed, making it an ideal option if you think you might need to access your savings or if you don’t want to commit to locking your money away for a long term.

4. Cash ISAs

Cash ISAs (Individual Savings Accounts) offer the benefit of tax-free savings up to an annual deposit limit of £20,000. They can be useful if you have a large amount of savings, or you’re an additional rate taxpayer and don’t qualify for the personal savings allowance (PSA).

There are four types of cash ISA to choose from, including the following:

• Instant access cash ISAs allow you to make deposits or withdrawals at any time, often without penalty.

• Regular savings ISAs usually offer a fixed interest rate if you deposit an agreed amount each month.

• Fixed rate cash ISAs are similar to fixed rate bonds in that your money is locked away for a set time to earn a competitive interest rate.

• Notice ISAs are almost a hybrid of an instant access ISA and a fixed rate ISA. They typically pay more competitive interest rates than instant access ISAs, but you need to give a set amount of notice when you want to make a withdrawal.

Although ISAs are renowned for their tax benefits, many people don’t actually need this perk. That’s because the PSA means basic rate taxpayers can earn up to £1,000 in interest without having to pay tax on it, while higher rate taxpayers can receive up to £500 in tax-free interest. It’s also worth noting that interest rates on ISAs have historically been lower than those available with other types of savings accounts.

However, tax-free savings accounts like ISAs might be a good option if your interest payments are likely to exceed the PSA, or you’re an additional rate taxpayer. 

5. Lifetime ISAs

If you’re aged between 18 and 40 and wondering what to do with your savings, you might consider a lifetime ISA. Lifetime ISAs are intended to help you either buy your first home or save for retirement. While you can only save up to £4,000 per tax year in a lifetime ISA, the government will then add 25% to your savings up to £1,000 per year. 

This means if you save £2,000 in one tax year, traditionally 6th April to 5th April, you’ll receive a £500 bonus. If you’re able to save the full amount of £4,000, you’ll earn a £1,000 bonus per tax year. 

If you want to take your first step onto the property ladder or put some money aside for your twilight years (and benefit from a little government help), a lifetime ISA could be one of the best places to save your money.

6. Investing in stocks and shares

While you might consider a savings account as the best place to put your savings without risk, investing in stocks and shares could give you a better return on investment. However, investing in the stock market is unpredictable and could put your capital at risk. 

It might not be right for you if you’re more risk-averse, but a stocks and shares ISA is a type of investment account that means you’ll invest in companies, government and corporate bonds and investment funds. It can provide good returns if you invest over a long period and are willing to take a risk. Remember that it’s entirely possible the value of your investments will go down as well as up, and there might be times when you get back less than you’ve originally invested. 

If you’re not sure what to do with your savings, you may be wondering whether it’s better to save or invest. The truth is, there’s no right answer, as everyone’s circumstances are different. That being said, if you can’t afford to lose your money, you’re in debt, or you don’t have an emergency fund set aside, saving is usually the best option. This is especially true if you opt for a high-yield savings account that pays a competitive interest rate. As well as earning a good return, you’ll have peace of mind that your money is protected.

On the other hand, if you can afford to take some risks, investing can be a good way to grow your wealth. Plus, you can help to mitigate the risk by diversifying your portfolio so that your money is spread across a variety of investments. 

If you’re considering how to make money on savings, remember, it doesn’t have to be an “either-or” situation; many people choose to combine saving and investing. For example, you could put the majority of your money into a high-yield savings account and then invest a smaller amount of your surplus cash in the stock market. 

If you want to quickly and easily open savings accounts online, consider using our marketplace. Find out how Raisin UK works, register for an account, and log in to apply and deposit your savings for free. After that, just sit back and watch your savings grow.

If you have any further questions, our UK-based Customer Service team is happy to help.