Short term

Up to 5 years

You're looking to save for the short term – perhaps with a particular goal in mind – you may want to make sure it's easy for you to access your money, and want to limit the risk of losing money. You might find that a savings product, or a cash ISA fits your needs.

A savings account

You could choose an account which offers immediate access to your money.

  • Regular or lump sum saving
  • Less risky than investing – but bear in mind that inflation will reduce what you can buy with your money
  • Specified rates of interest
  • If you are a basic rate taxpayer, no income tax is payable on the first £1,000 of interest you earn across all your non-ISA savings each year. This allowance is reduced to the first £500 of interest for higher rate taxpayers and is not available to additional rate taxpayers.
  • Shop around to find the best rates.

A cash ISA

This is a savings account where no income tax is payable on the interest you earn.

  • ISA stands for Individual Savings Account
  • Regular or lump sum saving
  • You need to be a UK resident aged at least 16.

Fixed term deposits

  • Less risky than investing
  • Your money is deposited for a fixed term which could be anything from a month to several years
  • Usually pay a higher rate of interest than easy-access accounts.
  • If you are a basic rate taxpayer, no income tax is payable on the first £1,000 of interest you earn across all your non-ISA savings each year. This allowance is reduced to the first £500 of interest for higher rate taxpayers and is not available to additional rate taxpayers.

How much might I save?

To help you think about how much to put away, we’ve developed an Investment calculator. It helps you to see how different monthly amounts, or lump sums, might build up towards your goal.

If you’re not sure how much you can afford to save, you could use My budget planner. This tool can help you see where you are spending most each month – so you can work out where you might make cut backs and save a little more. If you're thinking about taking out a cash ISA and/or a stocks and shares ISA, you're allowed to save up to £15,240 during the 2016/2017 tax year. You can withdraw money and pay it back in again without counting towards your ISA allowance provided this happens in the same financial year as the withdrawal.

What happens when I'm ready to take out my money?

  • You can usually withdraw money from a cash ISA or a savings account instantly, without a penalty, although some accounts may ask for a notice period.
  • If you're saving money in fixed term deposits, remember that you may not be allowed to take out your cash until the fixed term period is up. Alternatively, you may have to pay a penalty to do so. Always make sure you've read and understood the terms and conditions of your chosen account before you apply.

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