Top Student Savings Accounts 2013

Last updated: 18th January, 2013

how to open a student accountSo you have been fallen into a sum of money, but have no idea what to do with it. In the current financial uncertainty you are more likely to bury your savings in the back garden than trust them with a bank, but you might want to have a re-think.

One successful tool that has been overlooked in the wake of this ‘credit-crunch’ is the high-interest student savings account.

This avenue caters to those who are looking for a safe place to store a substantial amount of money over a period of time. During this time, not only does the account maintain the security of the funds, but also offers high interest rewards on a yearly basis, making the submission a hugely worthwhile investment.

Many will look at this with a degree scepticism, uttering the all too familiar cliché, “If it looks to good to be true, it usually is.” However during this venture, the process is completely transparent. All figures are pre-determined before submission and you can withdraw your funds at short notice, meaning that in an emergency, your money is readily available.

A typical interest rate for a student savings account is around the 4% mark, so over the course of 12 months you are increasing your total by a sizeable amount. In some instances the account will insist on a minimum initial credit, often of around £1000, however this investment results in a much increased rate.

For an investment of under £12,000 you could be earning a whopping £500 p/a for absolutely nothing, so get off to the garden with your shovel and spade, and hurry down the bank.

Use your 0% overdraft

If you are not going to use your 0% interest overdraft from your student account then it’s worth taking it out and investing it in a top savings account. The rewards are not as big as they used to be but it’s still worth it. Apart from the time and effort you have to put in it is like getting free money just by being clever.

Owen Burek (Founder of Save the Student!) invested his 0% overdraft of £3,000 and saw a return of around £200 by the time that he left University. This made using a student savings account all the more important.

Which Student Savings Account should you go for?

There are three types of savings accounts that you will need to consider and they are  a regular savings account, a standard savings account or a cash ISA.

Standard Savings Account

Did you know: Any interest on savings is taxed at 20%+. If you are a student who doesn’t earn over the tax threshold £8,105 (2012/13) your savings or interest won’t be taxed as long as you let the bank know.

Standard student savings accounts offer a good interest (around 3.5% dependent on access). You are allowed to put money in at any time but some savings accounts require a minimum deposit. The maximum is usually extremely high.

You start making interest every month as soon as you save your money and could feed your overdraft into your savings accounts. If you are willing to lock your money into the account for 3-5 years then you could earn interest up to 4.8% interest.

Regular Savings Account

They offer the highest interest (around 8%) to customers but you are required to make a payment into the account every month. If you can’t afford to make the payments or have to stretch to do so then a regular savings account is not suggested. Withdrawals are also limited. The regular savings account is probably not the best of the student savings accounts.

It’s important to bear in mind that even if they offer higher interest than a standard savings account you only get to put in a lower amount each month rather than the whole lump sum. A good tips is to open a standard savings account and then add the maximum amount into a regular savings account each month.

Cash ISAs

A cash ISA is a tax free student savings account that allows you to put a total of  £5,340 a year in. You could see a return at (around 3%) with instant access to your savings. As a student it may not seem like it’s worth putting your money in an ISA but a standard savings account.

However, there is a benefit to build up your ISA in the long term. The more you put in each year the more you will be able to put in your ISA tax free over your lifetime. For example if you put the maximum amount in your ISA during a 3 year course you will leave university with around £15,000 in savings that cannot be taxed. If you did the same in a standard savings account, once you leave University and start earning you will be charged the 20% tax on your savings.

Obviously for each person the correct decision differs. Some may want to build up their maximum ISA amount where as some may prefer holding their money for longer and earning more interest whilst at University.

Although all these student savings accounts are a great idea the return is not as good as it used to be with the high current rate of inflation and interest on your student loan increases.

Please check back with this article regularly to get facts and figures for the best student savings accounts 2012.

By students

Hello! This website has been written by student money experts Save the Student! to give you an overview of student bank accounts and what they have to offer you.

The studentsWe review the benefits and catches of all student accounts so you can make an informed choice and avoid the traps!

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