People save money to afford things in the future, such as a car, a house, or even a new pair of running shoes. Others create an emergency fund to cover unexpected expenses for 3+ months.

Why save in a savings account?

Money is kept safe and earns interest; this interest is the reward for saving. There are different types of savings accounts, including:

  1. ISAs (Individual Savings Accounts): These offer tax-free interest on savings up to £20,000.
  2. Fixed rate accounts: Lock away money for a set period in return for a higher interest rate.
  3. Easy access accounts: Withdraw your money easily. 
  4. Regular saver accounts: These require a fixed amount to be saved each month.
  5. Green savings accounts: Fund environmentally friendly projects.

Pensions are also a way of saving for retirement, often with tax benefits.

Compound interest: Interest calculated on the initial principal and the accumulated interest, making it a powerful tool for growing savings.