What are the benefits of a fixed rate Savings accounts

Most bank accounts in England have what is known as a variable interest rate. This means the rate of interest almost constantly changes depending on outside influences such as the economy and political goings on. The beauty of fixed rate savings accounts is that they offer a guaranteed interest rate for a certain period of time. This type of account is particularly helpful if you like to project potential savings growth and it is also a healthy way to invest a lump-sum of money.

Fixed rate savings accounts operate on the assumption and agreement that the account holder will not withdraw any of their funds until the agreed interest term is over. This means if you have a 2-year fixed rate, you can make deposits in to your account but the bank does not want you to withdraw from it. Of course, if your need is dire, you can withdraw but this is usually at the cost of a penalty charge and loss of accrued interest. The major benefit to fixed rate savings accounts is if you can afford to leave your savings alone, it is one of the fastest and easiest ways to generate more cash.

Fixed rate savings accounts also have guaranteed insurance cover for up to £85,000. This means in the event of the bank going bust or any other emergency, your money is insured and you won't lose a penny. If you plan to have more than this in an account, you should consider splitting it over as many accounts as it takes to get each one under the £85,000 limit.

It is important to note that fixed rate savings accounts do carry a small amount of risk. For example, if the interest was suddenly to skyrocket, your fixed rate would stay the same. Where as if you had a variable account it would allow for the higher interest. Just remember the longer your money sits in fixed rate savings accounts, the more risk of the interest rate increasing. Talk to a financial advisor, about which account will suit you best and how long of a fixed rate they advise.

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