Putting away the pennies helps to pile on the pounds by Halifax

For those who have spent much of their adult lives thinking about credit cards and bank loans, the choice of savings account may be a mystery. How should new-comers to saving decide where to squirrel away their hard-earned pennies?

How you save depends on things such as how much you have to save, how regularly you want to save and how often you might need access to your savings. Some people have long-term plans and put money away for a number of months or years without touching it. Savings accounts which suit this pattern of savings include bonds or fixed rate accounts, where interest is only paid once the bond period ends, or ‘matures’ - often in one to five years. Until then you cannot access your money. It’s a great way to invest if you don’t need to access your money and you want a guaranteed return with a high interest rate.

While some are happy to see their money locked way, other people like to save, but want to be able to access the cash should they need it. There are plenty of accounts that offer this, but there are also conditions attached. HSBC has a savings account for which 8% variable credit interest but only for balances up to £1,000. After that the rate drops to 2.5% up to £2,500 and then to 0.1% thereafter. Notice here there is a maximum amount the rate will apply to, whereas with many fixed-term bonds or savings accounts there is often a minimum deposit required.

Another form of saving is available in Individual Saving Accounts. Commonly known as ISAs, they offer savers tax-free interest. In most other forms of saving, people pay tax on their interest. Like savings accounts, ISAs come in a variety of forms - those you can access instantly, or ones that are fixed-term - and rates vary accordingly. You can also invest in a stocks and shares ISA which is a tax-efficient investment in a unit trust or shares.

Remember saving is not an either/or choice. Most serious savers have more than one approach. Some savings they can get at straight away, some they can’t for a few years, some guarantee a modest return, others could give fantastic returns, but with no guarantee. It’s a question of putting your money in different pots to balance the pros and cons of each approach.

There are some really excellent resources to help you find the right savings account for you online. And newspapers often discuss the best option for saving and can offer valuable advice. If you think you don’t have the money to save, remember you do not need a fortune to start. Even a few pounds put away regularly can add up. So put away the piggy bank and get that savings account opened. It could be the best decision you make this year.