Natwest has launched a new 3% savings account for those looking to start a rainy day fund for the first time.
The lender has released details on its new Digital Direct saver, which launches today and pays 3% on deposits of up to £50 a month.
It is designed to help customers with little or no savings develop a habit and, unlike other regular savings accounts, it does not expire after a year.
Through it, customers can save anything from £1 to £50 a month but you will need a Natwest bank account to get started.
Interest is paid monthly with the top rate of 3% interest paid on balances of up to £1,000. However, as with most regular savers, the interest paid paid as you go along - meaning you'll get 3% on your monthly balance, not the total annual amount.
Lewis Broadie, NatWest’s savings expert, said: "During lockdown many of our customers started to save for the first time. We are introducing the new Digital Regular Saver to help our customers start and maintain a long-term savings habit which will help them to become more financially secure."
However, Rachel Springall, finance expert at Moneyfacts, said customers should be aware that the account is "variable".
This means the rate could change with little or no notice.
"It's great to see such a competitive rate for savers looking to kickstart the savings habit and after the lockdown there may well be consumers who have some disposable cash spare to save," she said.
"On the other end of the spectrum, there may be consumers who wish to start up a savings pot in light of the uncertainty surrounding the Coronavirus pandemic."
"The gross interest rate of 3% would be limited on balances up to £1,000 and the maximum deposit is £50 per month, also as it is a variable rate it can change.
"All in all this account may attract savers who want to put aside a bit of cash each month but also have the option to dip into their savings if they so wish."
Right now, Natwest'S sister brand RBS is also offering new current account holders a £100 bonus when they switch via the Current Account Switch Service.
The incentive - which runs until November 19 - applies on its fee-free Select account Select or Reward account, while existing customers can upgrade to the Reward Silver, Reward Platinum or Reward Black for the bonus.
The Reward account pays around £4 a month if you have two direct debits registered. It also pays an additional £1 when you log onto online banking, however the account comes with a £2 a month fee.
To qualify for the bonus, you'll have to close your existing account and transfer your main current account to RBS.
Customers must pay in £1,500 and log into online or mobile banking through the Royal Bank of Scotland mobile app before December 30 to get the bonus by January 29, 2021.
What's so special about regular savings accounts?
Regular savings accounts allow you to start with little or no money, and often, you can open one with just £1.
They're designed to get you in the savings habit which means you'll need to top it up monthly to avoid any penalties.
Some of the best buys are only available to those with current accounts already, however there are options that are 'open to all'.
While Natwest's account is a rolling one, most are valid for a year, after which point you can withdraw your savings.
In short, these accounts are ideal for new savers that can afford to make frequent deposits.
But be aware that you won't get the headline rate on your full annual balance. This is because interest is paid monthly, so you'll get 3% on your balance as you go along.
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How much do I need to pay in?
The minimum monthly deposit is usually be around £10, however most accounts let you pay in a few hundred pounds a month.
Remember, these accounts aren't designed for those with lump sums, they exist to get you started.
Questions to ask when choosing an account:
Is there a withdrawal penalty?
Will I be penalised for missing a payment?
Is it variable or fixed? With variable deals there's the chance that the rate could change over the term of the account.
Are you an existing customer? If you are you may want to ask about any loyalty incentives (more on these below).
What about if I'm saving for something bigger?
If you're saving for a particular goal, you may find a different type of savings account is best.
For instance, if you have more to save but want instant access, you may consider an easy access account, if you have a lump sum and are happy to lock your cash away for a fixed term (and know you won't suddenly need it) a fixed rate bond might be ideal, and if you're saving for a child, a junior ISA may be the best way forward.
Likewise, if you're hoping to save for a deposit for a home a lifetime ISA may be worth considering.
If you're on universal credit, you may be able to earn more through a Help to Save account instead.
Top paying regular savings accounts right now
Existing customers only - Natwest : 3% interest, open with £1, rolling account, withdrawals allowed.
Existing customers only - HSBC: 2.75% interest, open with £25-£250, one year, no withdrawals allowed.
Open to all - Coventry Building Society: 1.55% interest, open with £1-£500, one year, withdrawals allowed.
Open to all - Principality Building Society: 1.5% interest, open with £1-£250, one year, withdrawals not allowed.
Source: Moneyfacts
