Short-term savings accounts received a boost this week, as Monzo Bank increased interest rates on its short-term savings accounts and introduced a new three-month option.
Savers with the Monzo Bank-OakNorth three-month fixed-term account can now earn the equivalent of 1.35% AER. Meanwhile Monzo's other savings account rates have increased by up to 0.1%.
But these aren't the only choices for savers reluctant to commit their cash for more than a year.
According to Moneyfacts, there are currently 142 short-term fixed-rate savings accounts on the market, with terms ranging from just three months up to 12 months.
Which? reveals which short-term accounts offer the highest rates, and how they compare to other ways to save.
The table below shows the top fixed-rate accounts with terms of 12 months or less, ranked by how long your money is locked away.
|Account type||Account||AER||Minimum initial deposit|
|12-month bond||Bank of London & The Middle East one-year fixed-term account||2.20% (EPR*)||£1,000|
|Nine-month bond||OakNorth nine-month fixed-term deposit||1.81%||£1|
|Six-month bond||Bank of London & The Middle East six-month fixed-term account||1.86% (EPR*)||£1,000|
|Three-month bond||Monzo Bank three-month fixed-term account||1.35%||£500|
*Expected Profit Rate. Source: Which? Money Compare and Moneyfacts. Correct 23 July 2019.
Generally, the longer the fixed term, the higher the rate you'll receive. Bank of London & The Middle East's six-month bond bucks this trend by offering a rate higher than the highest nine-month account, enabling your savings to grow faster in a shorter space of time.
With a rate of 1.35%, Monzo's new three-month bond is table-topping - and it's only available through Monzo's savings pots in the app. This could be great news for savers looking for a convenient short-term option.
But despite increased rates, Monzo's existing accounts aren't the best. In fact, you could get a better rate by going directly to its partner OakNorth. The new rates for Monzo's existing fixed-term accounts are:
Before opting for a new home for your savings, consider the pros and cons of these accounts. In some cases, you may be better off not opting for a fixed-term at all.
You'll need to weigh up each of these factors to decide what kind of account is likely to work best for your circumstances.
You don't necessarily have to lock up your money at all to help it grow. Here are a couple of options:
There aren't currently any cash Isas with a term of less than a year, but the top one-year fixed-rate accounts are:
While these rates are lower than savings accounts, they have the added benefit of being tax-free.
Interest earned from cash in a savings account may be taxable if it exceeds the . This varies depending on your income tax bracket - basic-rate taxpayers have a £1,000 personal savings allowance, while higher-rate taxpayers have £500, and additional-rate taxpayers don't receive any.
So, if you earn a high income, or hold a large savings pot that generates a lot of interest, using an Isa will mean you won't pay tax on your savings income.
sit somewhere between instant-access and fixed-term accounts. You can usually make unlimited withdrawals, but there's a catch - you have to give your provider a certain amount of notice before you'll receive the money.
The notice period will be specified when you open the account, but are most commonly 30 days, 60 days and 90 days - though other terms are available. Generally, accounts with longer notice periods have a higher rate of interest.
The top-rate notice accounts for 30, 60 and 90-day periods are:
If you have a smaller savings pot, a regular savings account can be a good bet.
You'll need to save a certain amount each month and depositing less than this, or withdrawing any money, could mean you lose out on the interest you've earned, so read the terms and conditions carefully.
The top regular savings accounts are:
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.