How to choose the best savings account

With so much choice out there, you might be put off opening a savings account, in spite of your best interests, because it is simply so confusing. However, it really is worthwhile putting your cash in such a vehicle, whatever you are saving for.

Before you start looking, make life easier for yourself by writing down what it is you need. This will allow you to discount any product that is not suitable.

For instance, you should consider what it is you are saving for. If you are putting cash away for your future, or to finance a large purchase like a house, you will want the best savings interest rates possible to ensure you get the most for your money. However, should you want a rainy day fund in case of emergency, you'll need the assurance that when that emergency occurs you will have few problems accessing the cash you require.

Once you have thought about what your requirements are, you can search the market to see what deals you can get. Although the Bank of England base rate is currently low – standing at 0.5 per cent since March 2009 – banks and building societies are still always looking for new savings customers, and will try and reel them in with attractive terms and conditions or enticing interest rates.

If you're still having trouble deciding, read on for our guide to some of the pros and cons of the various savings accounts available.

Fixed

This is a savings account that comes with a fixed rate of interest attached to it.

Pros: You don't have to worry about the Bank of England base rate falling.

Cons: Should the base rate increase, you might miss out. There are also often strict rules attached to withdrawing money, such as notice periods and penalties.

Variable

This type of savings account follows the Bank of England base rate.

Pros: When the base rate finally increases, you will enjoy the benefits.

Cons: If the base rate has been high and falls you will stand to see the interest you generate decline as well.

Regular

An account that enables you to save the same amount on the same date each month.

Pros: This makes saving so much more convenient as you don't have to worry about remembering to transfer your cash. If you are saving for the future, this can spread the cost.

Cons: Rules can be strict when it comes to access and you might face a penalty if you withdraw money sooner than the terms of the account stipulate. You may also be charged if you miss a regular payment, while you might not be able to pay in extra.

Easy access

As the name suggests, these accounts offer easy access.

Pros: You can open these accounts with a minimal amount of cash. In addition, withdrawing money from them is simple.

Cons: Because it is easy to pay money in and out, the interest rate is frequently lower than on other savings accounts.

Isa

This is an individual savings account that allows you to save up to a certain sum each year without it being taxed. For the 2012/13 tax year starting April 6th 2012, that sum £11,280, of which £5,640 can be put in a cash Isa and the remainder in a stocks and shares Isa.

Pros: You will not be charged tax on the first £5,640 you pay in each year. Drawing money out is straightforward and rarely requires you to provide a notice period.

Cons: If you do draw money out you will be reducing the sum you can enjoy tax-free interest on. An Isa must be opened by one person, which means it is not suitable for couples.

Now you know more about some of the savings accounts available, you can start searching the market to see which providers are offering attractive deals. However, once you have found one, don't let your hunt stop there.

Some people are experts at playing the market. They will open an account in order to take advantage of an attractive interest rate, but when this deal has ended they will move their money on, in order to reap the benefits of the next great offer.

You can choose to do this, but even if you prefer to stick with one account, by taking your time to carefully research what's available and how it matches your needs you have the pleasure of knowing your cash is in the best place.