Expert Tips from Martin Lewis on Choosing the Best Savings Account

Expert Tips from Martin Lewis on Choosing the Best Savings Account

We can all agree that navigating the world of banking can be daunting, especially if you are looking for somewhere to put your savings. It’s important that your savings are safe and secure, but it’s also important that your pot is growing with interest. With so many savings accounts out there, finding the best one often relies on the knowledge of an expert. 

With years of experience in personal finance, Martin Lewis is the ‘go to’ expert for making the right financial decisions. Below, IQ Money have taken a look at the UK most-loved money expert’s top tips for choosing the best savings account, helping you maximise your savings.

Who is Martin Lewis?

Martin Lewis has become a household name in a last decade, but you might know him better as the Money Saving Expert. With a background in financial journalism, Martin Lewis is best known for starting MoneySavingExpert.com and helping consumers to make smart financial decisions, save money and navigate the often complex world of banking. In 2003, Lewis launched Money Saving Expert, which quickly grew to become the leading personal finance advice website in the UK. Here, Lewis offers tips, tools, straight forward advice and guidance on a whole host of money matters, running from managing debt and finding the best value holiday insurance, to securing discounts on everyday expenses and choosing the right bank account for you.

As well as sharing his insights online, Martin Lewis is often seen on television and radio. The Martin Lewis Money Show is hugely popular, and he’s a regular face on Good Morning Britain. This is where he shares even more financial advice.

Martin Lewis’ contributions to the public understanding of finance have not gone unrecognised. He’s won several awards, and he’s been given an OBE for services to consumer rights and charity. Lewis has even managed to secure significant changes in government policy and industry practices. So, he’s undoubtedly knowledgeable and in a position to provide help when it comes to choosing the best savings account.

Martin Lewis’ Top Tips for Choosing the Best Savings Account

To help you find the best savings account, we have taken a look at some of Martin Lewis’ top tips.

Look for the Highest Possible Interest Rates

Martin Lewis says that, to get the best return on your savings, you need to focus on the highest possible interest rates. These come from regular savings accounts where you can earn up to 8%. He explains that “these give you higher rates, but you can only put small amounts in. They are designed for saving each month and putting away money each month. If you do have a lump sum, Lewis suggests “drip feeding the money from your normal savings into these to get absolutely maximum interest.”

Consider Switching to a Nationwide Regular Saving Account

There are a lot of savings accounts to choose from, but the Money Saving Expert explains that Nationwide currently offers the top interest of 8% and a payment of £200 if you make the switch. You have to have a Nationwide bank account to open a savings account, but switching your bank account from another provider is a worthwhile consideration as Nationwide pays the most interest at the moment. Lewis explains that “the most you can put in is £200, which means if you maxed it out over the year, you would earn £103 interest on £2,400 in there.”

Take Advantage of Getting £200 to Switch Bank Accounts

Banks will often try to encourage you to switch to their bank account, by offering you a lump sum payment to do so. A lot of savings accounts are only available to existing customers, so you will need to switch your bank in order to take advantage. This is the case with Nationwide, but Lewis says that “if you're not with Nationwide, you can switch your bank account and it'll pay you £200 to switch.” First Direct offers a similar incentive, paying you £175 to switch.

Choose an Account That’s Designed for Small Monthly Deposits

A lot of the best accounts are regular savings accounts, which offer high interest rates on small deposits. As Martin Lewis says, this is “perfect if you put money aside each month out of regular income.” He explains that most of these accounts “usually last one year, and then you can just open one again, and some lock the money away.” These accounts are designed for you to save small amounts each and every month, rewarding you with high interest rates on those small amounts. If you are a lump sum saver, you can benefit from these savings accounts, by “moving money out of normal savings each month, to earn more.”

Trial a Fixed Interest Savings Accounts Before Rates Change

Another of the Money Saving Expert’s tips is to take advantage of a fixed interest savings account, but do so with a focus on changing rates of inflation. He explains that a lot of fixed interest accounts have a breathing period, where you can withdraw your money and close the account without being charged or penalised in any way. This cooling off period is beneficial, as it allows you to deposit your savings into an account when the interest rate is good, and then keep the fixed rate even when inflation and the Bank of England rates change. If rates change and you decide you’d be better off elsewhere, and you’re still within your cooling off period, you can change accounts. 

Decide if You Need Easy Access to Your Money

If you want the option to access your money at any time, an easy access account is likely to be the best savings option for you. As Lewis explains, these accounts “tend to pay lower rates than many other types of account, but are a good place to keep your money if you're going to need it soon.” A lot of these accounts have introductory rates, which Lewis describes as “effectively acting as a minimum rate guarantee during the introductory period, promising you at least some interest.”

Consider Opening Multiple Accounts

There’s nothing stopping you from opening multiple accounts, and Martin Lewis explains that it could be a good thing. He explains that if you have a lot of money to save, opening several different savings accounts can be beneficial. For example, if you had £20,000 and you needed £5,000 of it soon, you could put £5,000 in an easy access account, and then put the rest into a fixed interest account. This gives you the best of both worlds; easy access and impressive returns.

Consider a Cash ISA if You Pay Tax on Savings Interest

The majority of people don’t pay tax on savings interest, but some do. If you are one of them, Martin Lewis suggests you open a cash ISA. He says: “If you've reached your personal savings allowance limit, then it's worth considering a cash ISA, as you never pay tax on the interest paid on that.”

Lock Money Away for Higher Returns

If you are unlikely to need your savings soon, you might want to lock them away for higher returns. A fixed rate account is a type of savings account, but the amount of interest that you earn is set for a fixed period of time. If you want to access the cash during this time, you will be charged and you might lose the higher interest rate.

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