Banking app Tandem has launched a new savings account that automatically collects spare change from your purchases. While a similar feature has already proved popular from competitors Starling and Monzo, this one comes with a twist - Tandem will also pay interest on your savings pot.
The feature will round up transactions on linked cards to the nearest pound, and automatically move the difference into a savings account for you. So, if you were to buy a coffee for £1.60, the transaction will appear as £2 on your statement and 40p would be deposited into savings.
Which? explores the different round-up saving options and the alternative ways you can build up a nest egg.
Tandem will also offer a 'Safe to Save' feature, which will calculate how much you can afford to save based on your income and outgoings. Alternatively, you can choose how much you wish to save each month, from a minimum of 5% of your income to a maximum of 15%.
To use the features, you would need to link your Tandem account with one of the following providers:
Digital bank Monzo automatically rounds up purchases and transfers the leftover pennies with its 'Coin Jar' function, though the balance of your account must be at least £10.
However, neither Revolut nor Monzo offer interest on balances in these savings pots, so your money won't grow over time. Also, these accounts will only round up transactions made on the Revolut or Monzo cards - you can't, for example, link your American Express to either account.
A number of high-street banks allow you to set up a round-up feature on their banking apps, and many of these will deposit directly into interest-paying savings accounts.
HSBC's Connected Money app allows you to move money automatically into your nominated savings account, though it's currently only available for iPhone users.
Lloyds Bank, Halifax and TSB all offer a Save the Change feature, which operate in a similar way.
With these accounts, you can choose where the money goes, although it will need to be an account with the same provider and can't be a monthly savings account, Isa product or fixed-rate deal.
If you'd like to take a risk in the markets, you can opt to invest your change, rather than saving it.
The Moneybox app, for example, links to your current account or credit card - or you can access it via your Starling Bank account.
Keep in mind that with any investment, your capital is at risk, so you may lose the money you invest.
Whenever you deposit money, you should check the level of protection you have if the provider were to go bust.
Revolut, by contrast, is not a bank and therefore not covered by the FSCS. Deposits you make are stored in a segregated trust account held by Barclays/Lloyds, which would need to provide you a refund if Revolut were to fail.
Starling Bank deposits are FSCS protected, but investments you make through Moneybox would fall under a different protection for investments. You won't be covered if your investment loses value (that's a risk you have to take on yourself), but you could be compensated up to £50,000 if the fund provider were to go bust.
So, with any nest egg, it's important to check the terms and conditions and make sure you fully understand how your money is being held.
If you're keen to save in a more structured way, a high-interest regular savings account could be an alternative.
Regular saving accounts typically last for one year, though you may be able to open a new account after it expires.
There are usually limits to how much you can deposit each month and how manywithdrawals you can make each year.
You can see the deals paying the highest interest below.
|Provider/account||AER||Minimum regular monthly deposit||Maximum regular monthly deposit|
|First Direct regular saver account||5%||£25||£300|
|M&S Monthly Saver||5%||£25||£25|
While the headline rates are impressive, beware that you'll have to build up your deposit slowly so you may earn less than you expect.
For example, if you save £1,200 over a year inregularmonthly installments of £100, you'd only earn the full 5% on the first months' deposit and the rest would be pro rated. Over the year, you're likely to earn £32.26 total in interest.
By contrast, if you opened a standard savings account, you could deposit £1,200 in one go and earn the headline rate on the full sum. To get the best rates, you'll need to lock away your money for a fixed time period.
Please note that the information above is for information purposes only and does not constitute advice. Please refer to the particular terms and conditions of the savings account provider before committing to any financial products.
Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.