Easy-access savings vs regular savings- where is your money better off?

We explore if an easy-access savings or regular savings account will make your money go the furthest

One large seedling and one small shoot are growing
(Image credit: Richard Drury)

Now is a golden opportunity for savers to put their cash into a high-paying savings account before returns drop further due to falling inflation and a halt to interest rate rises. 

It comes as savings rates hit a 15-high last year and top rates beat inflation

The latest data by Hargreaves Lansdown reveals 27% of savers have never switched their savings account for a better return, whilst 32% of people are not aware of the interest they are earning. 

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Granted, there is a great deal to think about before opting for either an easy-access savings account, a regular savings account, or fixing your cash depending on how much you can afford to save and the flexibility you will need with your money. 

Rachel Springall, finance expert at Moneyfacts says: “A regular savings account is a good choice to instil the savings habit, as many of these accounts require savers to put money away every single month. 

“However, easy-access accounts provide the most flexibility, and amid a cost-of-living crisis, some savers may want a pot they can quickly access in case of a financial emergency.”

With an easy-access savings account and a regular savings account being similar, we look into where your cash better off.

How does an easy-access savings account work? 

An easy-access savings account does what it says on the tin- it gives you flexibility with your cash. Traditional easy-access savers allow you to access your savings whenever you like and give you freedom on withdrawals.

The interest rate you earn is variable though, which means it can change at any time depending on market movement. They are great for a rainy day or emergency funds, whilst still earning interest on your money. 

That said, lenders are imposing more and more hidden restrictions on easy-access accounts despite a high headline rate- to lure you in. 

Restrictions include limits to withdrawals, for example, the Virgin Money Defined Access E-saver which features on our best buy table only allows up to three withdrawals per year. 

Some accounts also include a bonus rate in the headline rate for a certain period, such as Santander’s Edge Saver which offers 7% (including a 2.5% bonus rate). Eligibility restrictions could also apply, like this Santander saver which is only open to Edge customers. 

Springall warns savers to “check terms and conditions carefully as some easy-access accounts pose withdrawal restrictions, so it’s vital consumers and stay within any limits to benefit from the full interest rate on offer.”

Currently, the top rate available is 5.22% with Metro Bank on their Instant Access Savings account, which requires a minimum deposit of £500. 

How does a regular savings account work? 

Regular savings accounts are less flexible than easy-access accounts and hit savers with a lot more caveats.

The most common feature of a regular saver is it will impose a minimum payment you need to pay monthly into the account, and you will be restricted in how much you can pay into the saver every month. 

Plus, a lot of regular savers require you to be an existing customer of the bank, but that’s not with all accounts. 

The good news is, that as you don’t have as much freedom, the rate you earn on a regular saver tends to be higher than what you earn on an easy-access savings account, and the rate tends to be fixed- giving you certainty on the interest you earn. 

Currently, the top-paying regular savings account is offering 8% from Nationwide (also the best savings account rate on the market right now), fixed for 12 months. But you need to hold a Nationwide Flex account and you can only save up to £200 per month. Plus, it only permits up to three withdrawals a year. 

Though some regular savings accounts do offer freedom with withdrawals- and with a more attractive rate, will your savings go further in a regular savings account or easy-access account?

Is my money better off in an easy-access savings account or regular savings? 

On our regular savings best buy table, you will see some products that are very similar to an easy-access account, whereby it gives you hassle-free access to your cash. But which account will give you a better return? 

Assuming that you have a lump sum of £5,000 to save, here’s how much interest you would earn if you drip-feed your cash monthly into a regular savings account that offers a better rate, compared to saving in an easy-access account. 

Regular savings account

Natwest is the top lender on our regular savings guide that acts as a traditional regular savings account offering 6.17% AER, and it lets you access your money whenever you want. Plus the rate is variable. 

The major caveats here are that you can only save up to £5,000 into the account and you are restricted to saving up to £150 per month. 

Interest is earned monthly on the balance in your account, so as you put more money into your savings, the more interest you will earn. 

If you were to save £150 a month for six months and earn a rate of 6.17%, here’s how much interest you would earn. For calculation purposes, even though the rate is variable and could change, we have kept it at 6.17% for six months. 

Swipe to scroll horizontally
Header Cell - Column 0 Amount in savingsInterest earned monthly
Month 1£150£0.77
Month 2£300£1.54
Month 3£450£2.31
Month 4£600£3.08
Month 5£750£3.86
Month 6£900£4.63

After six months, you would earn a total of £16.19 in interest. 

It would take you 33 months to save £4,950 (closest to the £5,000 maximum deposit). Hypothetically speaking, if the rate was still 6.17%, you would earn £25.45 in interest. But the likelihood of the rate staying the same after two years is slim. 

Easy access savings account

The top-paying easy-access savings account is offered by Metro Bank at 5.22%- below the 6% mark that the regular saver offers. 

The good news about this saver is, it allows a maximum deposit of £2million, and up to £85,000 is protected by the FSCS. The account requires a minimum deposit of £500 which must be deposited within 28 days of opening your account. 

On the basis that you have £5,000 to save, you can put the whole sum into this easy-access account and earn £21.75 in interest in just one month. 

Obviously, this isn’t realistic for many savers. So, for a like-on-like comparison, here’s how much you earn in interest if you paid a £500 deposit and saved £150 each month for six months. 

Swipe to scroll horizontally
Header Cell - Column 0 Amount in savingsInterest earned monthly
Month 1 (deposit)£500£2.17
Month 2£650£2.83
Month 3£800£3.48
Month 4£950£4.13
Month 5£1,100£4.79
Month 6£1,250£5.44

After six months of saving, you earn a collective £22.84 in interest, which is £6.65 more than what you would earn in NatWest's regular savings account. 

Because of the £500 minimum deposit, it gives your savings balance a big boost, which means you earn more interest in the top easy-access account compared to a regular savings account. 

The verdict

Of course, it’s not always a given that this is the case. It will always depend on the rate offered by the lender, the deposit required on the easy-access account, how much you can afford to pay monthly, and how much you can pay into the regular savings account per month. 

For example, if the regular saver allowed up to £500 per month to be saved and the easy-access account had a minimum deposit of £1, the regular saver could potentially make your money go further, depending on how much you save per month. 

Plus, with an easy-access account there is no guarantee that the headline rate will stay the same, as it’s variable. Whereas some regular savings accounts offer a fixed rate for 12 months, which at least gives you certainty on what you will earn. 

Vaishali Varu
Staff Writer

Vaishali has a background in personal finance and a passion for helping people manage their finances. As a staff writer for MoneyWeek, Vaishali covers the latest news, trends and insights on property, savings and ISAs.

She also has bylines for the U.S. personal finance site Kiplinger.com and Ideal Home, GoodTo, inews, The Week and the Leicester Mercury

Before joining MoneyWeek, Vaishali worked in marketing and copywriting for small businesses. Away from her desk, Vaishali likes to travel, socialise and cook homely favourites