Saving for gifts - Christmas presents under the tree

Buying presents for children can be an expensive business – especially at Christmas, when you may have to buy gifts for more than one child at once.

Many people choose to borrow the money that they require, either with a personal loan or a credit card, but this can be the start of a slippery slope, financially speaking. It makes a lot more sense to start saving a few months or even a year in advance, so that you don’t have to pay any interest on a loan, and so that you can benefit from the interest that you accumulate while you are saving.

Generally speaking, the best way to save in the short term is to put money into a high interest savings account. Some savings accounts will pay as much as six percent interest over the course of a year, which can come in very handy indeed. However, the savings accounts that offer the highest rate of interest usually tend to come with some usage restrictions. For instance, some accounts, commonly known as regular savings accounts, require you to put in a certain amount of money each month in order to obtain the advertised rate. Another popular type of savings account, known as notice accounts, require you to give the bank or building society thirty, sixty, or ninety days notice before withdrawing funds, or you will forfeit interest payments and bonuses.

While accounts such as these are all well and good if you are saving over the longer term, they are not particularly convenient if you are saving over the shorter term. In these circumstances, it is best to look for an instant access account with no deposit or withdrawal restrictions that has the highest interest rate that you can find. This really leaves you with two options – fixed rate savings accounts and variable rate savings accounts. With a fixed rate account, you can be guaranteed that the interest rate will not fluctuate over time. However, fixed rate accounts tend to offer lower starting rates of interest than their variable rate brethren. It is unlikely that the interest rate on a variable rate savings account will fluctuate all that much over the course of a few months, so in most cases, this is the most suitable type of account for those looking to save for gift purchases. For more information about savings, visit the Santander website.