It’s a frustrating time for savers right now as interest rates in the UK remain low and, in general, the rates offered on most savings accounts are pretty appalling.
Having said that, if you’re willing to spend a bit of time researching the best savings account rates on offer, you can find some deals that are relatively attractive. Here’s a look at three top saving account rates I’ve spotted recently.
Marcus by Goldman Sachs
If you’re looking for a savings account that is extremely flexible, the Marcus account could be worth a look. This account currently pays 1.5% AER (which includes a 0.15% bonus for 12 months). The advantages of this account are that it can be opened online and that you can make as many withdrawals as you want without penalty.
Metro Bank 1-Year Fixed-Term Account
If you’re happy to lock your money away for a year, this account could be worth considering. It currently pays an interest rate of 2% AER, which is certainly higher than the interest rates offered on most savings accounts. The minimum deposit is £500 and the maximum is £2m.
The drawback of this account is that it’s less flexible than many other savings accounts as you won’t have access to your funds. However, if you don’t need your money in the next 12 months, it could be a good option.
Virgin Money Regular Saver
Finally, this account currently offers an interest rate of an impressive 3% AER, which is quite high in today’s low-interest-rate environment. And your money is not locked away either as you can access it at any time.
There are two main issues to note with this account. Firstly, you can only save between £1 and £250 per month. Secondly, the account can only be opened in a branch. While these issues may be a little annoying, they’re certainly not deal-breakers.
Interested in higher returns?
Of course, if you’re willing to accept a little risk, there are ways to generate much higher returns on your money. One example is stock market investing. With stocks, you can expect returns of between 6% to 10% per year over the long run.
Stock market investing often gets a bad reputation as it’s generally not well understood. In the short term, stock markets can be volatile, meaning the value of your investments can go down. Novice investors often panic when this happens and they end up losing money.
However, over the long term, stock markets tend to rise. So if you’re in it for the long term, and you don’t panic when markets fall in the short term, the chances are you’ll generate a decent return on your money.
In the past, stocks have generated returns far higher than those from cash savings accounts. Just look at the performance of the Fundsmith Equity fund (a popular investment fund which invests globally) – over the last five years, it has grown at around 23% per year!
The takeaway here is that if you’re looking for higher returns on your money, it could be worth considering stock market investing instead of just keeping all your money in cash savings earning a low rate of return.
Stock market investing is riskier than keeping your money in a savings account, but the rewards can be far greater.
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Edward Sheldon has a position in the Fundsmith Equity fund. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.