If you do one bit of admin today, make it switching your savings account.
I’ve always struggled with financial literacy. For a long time, I thought being financially responsible meant hoping that someone else’s HelloFresh box would magically appear on my doorstep instead of theirs.
I’ve kept all my money in the same savings account since I was 15, and never once questioned whether or not it was the right decision. But, as it turns out, switching savings accounts might be one of the easiest ways to make a smart money move. To find out more, I spoke with two personal finance experts to get their insights.
Why are people not switching their savings account?
Moneyfacts, a platform that compiles data to compare financial services, conducted a survey to understand people’s savings habits better. The findings were revealing.
The average person saves around 11% of their earnings. However, nearly half of all savers could be missing out on significant returns — with almost one in four respondents admitting they’ve never switched their savings account. A further 23% said they switch accounts less than every couple of years.
Rachel Springall, a personal finance advisor with over 20 years of experience, shared her perspective:
“Trust is a big part of building a savings pot, so many people don’t want to risk their hard-earned cash and feel more comfortable staying with their existing bank. There is also an argument that, due to years of low interest rates and high inflation, savers may feel it’s not worth switching their pots, but that’s not true.”
She added that challenger banks (like Monzo and Revolut) and building societies often offer some of the best returns on the savings market. Yet, many people still keep their money in high street banks or even in current accounts that earn little to no interest.
Rachel emphasized that switching doesn’t take much effort and is important to get into the habit of earning a rate that can outpace the eroding effect of inflation.
The psychology behind not switching
As someone who will happily put off life admin until the very last second, I can definitely relate to people who’ve found themselves slacking in this department.
James Blower, founder of Savings Guru, explained: “I think the industry term is called inertia rather than laziness. But I think laziness is a bit harsh. It’s probably a little bit of fear. It’s fear that it’s going to take a lot longer — that it’s going to be a hassle.”
He noted that many people save with their current account provider, with statistics showing that between 60% to 70% of people actually save with the same provider they have their current account with.
In reality, switching to a new savings account is incredibly straightforward. James joked that during the length of our conversation, I could have opened up two different savings accounts already.
He added that most banks approve 92% to 93% of savings account applications without any referral.
Benefits of switching your savings account
For many people, the reason they haven’t switched their account might simply be because they’re unaware of the potential benefits.
James pointed out that while there might not be massive profits to be gained, the difference in interest rates can add up. He mentioned that easy access accounts from big high street banks typically pay 1% to 2%, while the best rates in the market can go up to 4.5%.
“That’s quite a lot of difference, even on £1,000 – that could be £35 or £40 difference. So, if you start to multiply that, there can be a significant jump.”
On current accounts, the numbers can be even greater, with both the switch and joining benefits being really high. James recommends reviewing rates every six months and switching if a better return is available. He also advises reviewing rates around a month after base rate cuts.
What are the best savings accounts to use?
According to Rachel, there are a few options to consider if you’re thinking about switching.
“If you’re saving for an emergency, then an easy access account is ideal as it offers complete flexibility. There are also easy access cash ISAs to consider for those who haven’t used up their annual ISA allowance yet.”
Rachel also suggested that those saving for their first home could open a Lifetime ISA, as the Government will boost the deposit by 25%, but she advised checking the terms and conditions before opening one.
James mentioned that banks like Chase offer interesting schemes where you can ‘try before you buy.’ You don’t have to switch officially; you can just open an account, send some money over, and play around with it to see if the benefits appeal to you.
It’s never too late to start a savings account
“You can’t blame savers for feeling apathetic,” Rachel shared, “but it’s never too late to start saving little and often to build a nest egg.”
There are even apps designed to automate the savings habit by taking deposits, making it easy to check in on the growing pot each week.
Recent data shows that one in six UK adults have no savings. Experts suggest that adults should have saved £37,430 by their 30th birthday, but those aged 25-34 only have an average of £9,357 saved.
Despite this, there are many young savers on social media spreading the word and helping people less financially literate understand different kinds of accounts.
If you haven’t yet opened a savings account, take this as a sign. Aside from promoting good ‘habit forming,’ it could also save your skin in a time of need.
Savings accounts play a critical role in preventing ‘shock bills’ from spiraling out of control. James notes that without an emergency stash, you might end up using a credit card or getting a short-term loan at 39.9% interest, which can lead to long-term financial problems.
“We’re all more optimistic about how we can deal with these problems than the reality usually is.”
Final thoughts
If you’re officially feeling tempted, Rachel suggests that one of the most popular savings accounts for putting some cash away every month is a regular savings account. These boast high returns of interest on each deposit and encourage the savings habit.
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