When you open a regular savings account, you will be required to commit to saving a certain amount of money every month. In return, the bank will award you an interest rate that is higher than the interest that you would earn if you decided to put your money in other types of accounts.
The benefits of a regular savings account
A regular savings account can be very beneficial especially if you want to increase the amount of money that you save every month. This account will benefit you a lot if:
- You want to make regular saving a habit.
- You want to earn more interest than the interest that you would earn with an ordinary savings account or a current account.
- You want to save for something special such as a wedding.
- You don’t like the idea of investing a lump sum.
How regular savings accounts work
The account provided by different banks work in different ways. In general, when you open this type of account, you must pay money into your savings account every month. In most banks and other financial institutions, you will be required to open a current account before you qualify to open a regular savings account.
You will get all your money back at the end of the fixed term plus the interest earned. In some accounts, the interest rate is fixed. In others, the interest rate is variable. Find out whether the interest rate is fixed or variable before you open your account.
The interest rate can be reduced if you need to make a withdrawal or if you don’t save every month as expected. Not all accounts will allow you to make a withdrawal. There are some accounts that don’t allow early withdrawals. It important to check the rules carefully before you open an account.