Are your rainy day savings really in the right place?

Are your savings in the right place?

Savers that stash their emergency cash in an easy access account should check what return their money is earning as the gap between the best and worst deal is growing.

Moneyfacts data shows that the worst easy access account on the market is available from the NatWest Instant Saver and pays just 0.01%, but the average rate on easy access deals has surged 34% in the last three months.

A saver earning a typical £27,000 a year who has the recommended three months' emergency savings fund of £5,409 would be earning a miserly 54p a year in the worst account.

Those with a bigger cushion of six months' savings, which for the average worker is £10,820, would get just £1.08.

Here's a look at three better easy access options for your emergency savings fund and how much you could pocket by making the simple switch.

Easy access savings accounts

Your rainy day savings could be earning a much better rate of 1.3% with the RCI Bank Freedom Savings Account.

By moving a pot of £5,409 to this top easy access account, you could earn £70.32 a year.

For those with six months' stashed away the benefits of switching are even greater.

On a pot of £10,820 moving to the RCI Bank Freedom Savings Account will get you a much better £140.66 after 12 months.

Compare and switch savings accounts today

Easy access Cash ISAs

Savers can now get up to £1,000 worth of savings interest tax-free each year thanks to the Personal Savings Allowance.

But it's still worth opening an ISA as it will allow you to earn an unlimited amount of interest tax-free, now and in the future when rates get better.

The top easy access Cash ISA deal on the market is the Leeds Building Society Limited Issue Online Access ISA (Issue 3), which pays 1.11%.

On a pot of £5,409 that means pocketing £60 interest a year, while a rainy-day fund of £10,820 will earn £120.

Current accounts

Current accounts that pay in-credit interest are another great home for emergency cash.

At the moment the Santander 123 Current Account is best for larger balances as it pays a flat rate of 1.5% on deposits up to £20,000.

To earn interest, you will need to set up two Direct Debits and deposit at least £500 a month.

The account attracts a £5 monthly fee, but you may be able to offset this cost by earning cashback of up to 3% on your household bills.

On a £5,409 balance, the Santander 123 Current Account would earn you £81.14 a year, while for those with a £10,820 balance that rises to £162.30 (without factoring in the monthly account fee).

Compare current accounts paying in-credit interest

Savings and inflation

Inflation is at a five-year high of 3%. So, ideally, savers need all their money to be earning at least 3% to stop the value of their cash eroding in real terms.

Unfortunately, easy access accounts for large emergency cash reserves are a long way off this sort of rate.

If you are happy to split your money into smaller pots, lock your money away or take on more risk, there are other options available to you.

Compare potential returns from peer-to-peer lending against traditional savings accounts

Vintage money-saving tips
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Vintage money-saving tips
Back then there was no choice, because the mass-produced microwaveable meal was just a glint in a marketing guru's eye, but now, cooking from scratch can save substantial sums.
The older generation learned that there were meat-free days of the week to save money, and that if you had meat you''d stretch mince with breadcrumbs, or buy cheaper joints and use every scrap.
Perfect fruit and vegetables and top-of-the-range brands are a new phenomenon. Buy generic non-branded food and fruit and vegetables in whatever size and shape is most affordable

Nowadays we rush around the supermarket grabbing things we like the look of - with little idea of what we're going to do with it. Making a list and thinking about what you buy can save you thousands of pounds over the course of a year.

There's no such thing as 'left-overs' there's just the ingredients for tomorrow's dinner. The remains of the meat can be stir-fried the next day, the vegetables blended into  soup, and the potatoes saved for bubble and squeak.

Try an experiment and eliminate everything from your life with the word disposable in the title. Not only will you save money, but your bin will take far longer to fill too.

Before you bin anything, think twice about whether you can give it a second life. Think carefully, does your granny have her tried and tested tips that she has a habit of mentioning, for instance, washing out freezer bags? If you mock, you're missing a trick and wasting money and resources.
Cutting out draughts and insulating your home properly can cut 10% off your heating bill.
Back in the 1940s when no-one had central heating, people got used to wearing another layer at home. Try lowering your thermostat gradually, and only stop when those around you start to notice - you'll be surprised how much you can save.
If you save your washing and dish washing until you have a full load every time you'll save energy and save money.
Over the generations we have been sucked into believing the hype. In the days when adverts were few-and-far between, we managed without many of the things we consider essential nowadays. Re-consider what you buy, and why. Without advertising, would you buy any of it?
It's always cheaper to save in advance and plan a purchase than to rush in and borrow - which could end up costing you hundreds of pounds more in interest.
Older generations typically withdraw what they can afford to spend in cash and then leave their debit card at home or deep in their wallets. This has the advantage that they don't tend to reach for a debit or credit card and spend more than they can afford.
Because the older generations couldn't borrow their way out of trouble, they tended to plan more. Give your family a financial safety and a nest egg for the future.
Back when there were only a finite number of items of clothing to go around in a neighbourhood, people borrowed from each other for special occasions. Nowadays swapping and sharing can save substantial sums
Back in the 1940s when no-one had central heating, people got used to wearing another layer at home. Try lowering your thermostat gradually, and only stop when those around you start to notice - you'll be surprised how much you can save.
There was a time not so long ago when no-one could actually remember anyone who had actually bought a bike. They were passed through the siblings, then across family and friends networks, so that decades later, children were still learning to ride a bike for free. Of course it helps if you buy something gender-neutral, then you can hand it down, and reap the benefits as others hand expensive toys on to you.
In previous generations, neighbours would think nothing of asking each other to babysit, walk their dog, or to borrow a ladder. Nowadays we pay handsomely for babysitters and dog walkers, and each have an expensive ladder gathering dust in the shed.
The army of people who come to our homes to do odd jobs is a new phenomenon for all but the very wealthy. You may well have the skills required to complete these jobs, so get stuck in.

Ditch going out for dinner or browsing round the shops for taking a walk, visiting the beach with a picnic, or holding a family DVD night.

Nowadays we're constantly striving for a bigger TV, a flashier car and a better kitchen. Generations ago people never considered that they would ever be able to afford bigger, flashier and better, so they got on with the business of enjoying what they had.

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