Regular savings accounts - are they worth it during your DMP?

When you’re on the tight budget your DMP allows, saving any money at all is an achievement itself. So you’ll want to make the most of the money you manage to put aside.

These days there aren’t many accounts out there that pay great rewards on your savings - unless you're willing to lock your money away for a long time, which isn’t a great idea if it’s your only emergency fund.

But it is possible to get a 5% return on your savings with a regular savings account. Would one of these accounts work for you?

What are regular savings accounts?

A regular saving account is an account into which you pay your savings – regularly. The clue is in the name! Many of these accounts offer an eye-catching rate of interest. Most require you to pay in each month. There’s usually some form of penalty if you miss a payment. (See more on this under ‘Downsides’ below.)

What are the advantages of a regular savings account?

You could access some of the best interest rates around. What’s more, saving the same amount every month is a great way to strengthen a disciplined savings habit. Committing to regular saving may seem daunting, but it’s possible to start small. Some accounts allow you to save as little as £10 per month.

What are the downsides?

Regular savings accounts are somewhat inflexible by nature. Once you start paying into a regular savings account, you'll have to keep topping it up every month. Failing to make a payment one month could mean paying a penalty, and therefore losing a chunk of the money you’ve saved. There may be other rigid terms and conditions, such as a limit to the amount of withdrawals you can make.

How do I choose the best regular savings account for me?

As well as looking for the best interest rate, don’t forget to think about the other terms and conditions to find a regular savings account that suits your needs. When, and how easily, will you be able to withdraw your money? What penalties are there if you miss a payment? Also, what are the criteria for opening the account? Many are linked accounts. This means that to get them, you need to have the bank's current account too.

To help rebuild your credit score while you save, you could also try LOQBOX. This is a savings account which reports your regular deposits (a minimum of £20 per month) to the credit reference agencies as repayments on a loan, thus improving your credit score.

For more information about choosing a savings account - including the advantages of regular savings and how to compare rates - visit the Money Advice Service website. Happy saving!

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