Rising living costs are forcing people to rely on their savings and borrowing to cover basic necessities. As of May 2022, UK adults carried an average of approximately £5,600 in non-mortgage debt when including student loans, or £2,700 when excluding them.
Having savings is crucial for financial stability. Families with money set aside are better equipped to handle unexpected financial challenges. Research by the Resolution Foundation revealed that between 2018 and 2020, three in ten working-age adults in Great Britain belonged to households with less than £1,000 in savings, while one in twenty had no savings whatsoever. Those with minimal savings (under £1,000) were twice as likely to take on debt in the year leading up to October 2023 compared to those with larger financial cushions, 34% versus 16%.
Building an emergency fund of several thousand pounds in an easily accessible location is essential. Logic suggests that unexpected expenses are inevitable, with research indicating these typically cost around £3,000. However, keeping your emergency money accessible doesn’t mean hiding cash at home. The optimal approach is storing these funds in an instant-access savings account offering competitive interest rates, ideally tax-free options. Your emergency fund should be held in zero-risk accounts like instant-access savings rather than volatile investments such as stocks, ensuring your money remains secure. While earning interest on your emergency savings is beneficial, it shouldn’t be your primary motivation, the ability to quickly access funds during crises is paramount. Be cautious about maintaining excessive amounts in these accounts, as maximizing interest rates becomes increasingly important with larger sums. Keep only what you need for emergencies and invest any surplus more strategically elsewhere.
The Best Saving Accounts
As a migrant settling in the UK, understanding your financial options is crucial for building a secure future. This article will guide you through the essentials of savings accounts, their importance, and highlight some of the best regular savings accounts available for new residents in the UK.
Savings Account vs. Current Account: What’s the Difference?
Before diving into the best savings accounts, let’s clarify the fundamental difference between a savings account and a current account:
- Current Account (Cheque Account): This is your everyday banking account. You’ll use it to receive your salary, pay bills (via direct debits and standing orders), and for daily spending using a debit card. Current accounts typically offer very low or no interest on your balance, as their primary purpose is transactional. You have frequent and easy access to your money.
- Savings Account: As the name suggests, a savings account is designed for saving money. Its main purpose is to help you grow your money by earning interest. Unlike current accounts, savings accounts often have restrictions on withdrawals or limits on how much you can deposit monthly. The interest rates on savings accounts are generally higher than those on current accounts, making them ideal for setting aside funds you don’t need immediate access to.
The Importance of Having a Savings Account
Having a dedicated savings account is vital for everyone, especially for migrants building a new life in the UK. Here’s why:
- Financial Security and Emergency Fund: Life is unpredictable. An emergency fund in a savings account provides a crucial safety net for unexpected expenses like medical emergencies, job loss, or urgent travel. For migrants, this is even more critical as you might not have the same support networks as in your home country.
- Achieving Financial Goals: Whether you’re saving for a house deposit, a car, further education, or a trip to visit family back home, a savings account helps you steadily accumulate funds towards your goals. The interest earned means your money works harder for you.
- Building a Credit History (Indirectly): While a savings account doesn’t directly build your credit score like a loan or credit card, demonstrating responsible financial habits, such as consistently saving, can contribute to your overall financial standing, which can be beneficial when applying for other financial products in the future.
- Separating Funds: Keeping your savings separate from your daily spending money helps prevent accidental spending and encourages a disciplined approach to saving.10
- Earning Interest: Unlike money left in a current account or under your mattress, money in a savings account earns interest, helping your wealth grow over time. This is particularly beneficial with higher-interest regular saver accounts.
Best Regular Savings Accounts in the UK for Migrants
For migrants, the key considerations when choosing a savings account often include ease of opening (especially with new proof of address), competitive interest rates, and flexibility. Regular savings accounts are an excellent option if you can commit to saving a fixed amount each month, as they often offer the highest interest rates.
Here are some of the top regular savings accounts available in the UK, keeping in mind that some may require you to be an existing current account customer:
Principality Building Society 6 Month Regular Saver
👉 Why it’s good?
This account currently offers one of the highest fixed interest rates available, at 7.50% AER. It’s open to all new customers, not just existing ones, which is a significant advantage for migrants. You can apply online or in a branch.
📝 Things to note
The term is only 6 months, and there’s a maximum monthly deposit of £200. Once your balance reaches £1,200, you can’t add more. Withdrawals aren’t allowed during the term, but you can close the account early without penalty. This is not designed for people who want to pay in more than £200 per month or want to save more than £1,200 in total
First Direct Regular Saver Account
👉 Why it’s good?
Offers a competitive fixed interest rate of 7.00% AER for 12 months. Interest is calculated daily and paid after a year.
📝 Things to note
This account requires you to be an existing First Direct current account customer and you must set up a standing order for monthly payments (£25 – £300). No withdrawals are allowed until the end of the 12 months, or the account will be closed prematurely.
The Co-operative Bank Regular Saver
👉 Why it’s good?
Pays a variable interest rate of 7.00% AER for 12 months. You can open it with as little as £1 and save up to £250 a month. It allows for unlimited withdrawals without penalty and you can skip months if needed.
📝 Things to note
This account is exclusively for existing Co-operative Bank current account customers. The rate is variable, meaning it could change.
Lloyds Bank Club Lloyds Monthly Saver
👉 Why it’s good?
Provides a fixed interest rate of 6.25% AER for 12 months, on monthly deposits of up to £400. You can make withdrawals and skip months.
📝 Things to note
Requires a Club Lloyds current account, which may have eligibility criteria or a monthly fee if certain conditions aren’t met.
Important Considerations for Migrants:
- Proof of Identity and Address: When opening any bank account in the UK, you will need to provide proof of identity (e.g., passport, Biometric Residence Permit – BRP) and proof of address in the UK (e.g., utility bill, bank statement, council tax bill, or a letter from your employer). Digital banks like Monzo, Monese, Revolut, and Starling Bank are often cited as being easier for new arrivals to open accounts with, as they may accept a BRP and an address for card delivery as sufficient.
- FSCS Protection: Ensure your chosen bank or building society is covered by the Financial Services Compensation Scheme (FSCS). This protects your eligible deposits up to £85,000 per person, per institution, in the unlikely event that the bank fails. All the providers listed above are typically FSCS protected.
- Online vs. Branch Banking: Consider whether you prefer managing your account online or in person. Online-only accounts often offer higher interest rates due to lower overheads.
- Existing Customer Requirement: Many of the top regular saver accounts are offered as a perk to existing current account customers. If you’re a new resident, you might need to open a current account with that bank first to access their best savings rates.
Best Regular Savings Accounts for Migrants in the UK: Summary
| Provider & Account Name | Current AER Interest Rate | Key Features for Migrants | |
|---|---|---|---|
| Principality BS 6 Month Regular Saver | 7.50% (Fixed) | Highly Recommended: Open to all, not just existing customers. Top fixed rate. Ideal for short-term savings goals. | Sign Up |
| First Direct Regular Saver Account | 7.00% (Fixed) | Excellent fixed rate, but requires an existing First Direct current account. Good for disciplined savers who won’t need access for 12 months. | Sign Up |
| The Co-operative Bank Regular Saver | 7.00% (Variable) | Good variable rate with flexibility to skip months and make unlimited penalty-free withdrawals. Requires an existing Co-operative Bank current account. | Sign Up |
| Nationwide Flex Regular Saver | 6.50% (Variable) | Competitive variable rate with some withdrawal flexibility (3 per year). Typically for existing Nationwide current account holders. | Sign Up |
| Lloyds Bank Club Lloyds Monthly Saver | 6.25% (Fixed) | Solid fixed rate with higher monthly deposit limit (£400). Allows withdrawals and skipped months. Requires a Club Lloyds current account. | Sign Up |
Conclusion
Opening a savings account is a crucial step for migrants establishing themselves financially in the UK. By understanding the different types of accounts and their benefits, you can make informed decisions that align with your financial goals. While some top regular saver accounts require an existing current account relationship, options like Principality Building Society’s Regular Saver are open to all, making them excellent starting points for new residents looking to maximise their savings. Always compare rates, read the terms and conditions carefully, and ensure your money is protected by the FSCS.
