Two years ago this question barely mattered because both options paid almost nothing. That has changed and I found myself having to decide where to keep money that needs to stay accessible but should still earn something while it waits.
Easy Access Savings: Flexible and Safe
With an easy access savings account, your money is available any time – usually within 1 business day. You can deposit and withdraw freely with no penalties. The interest rate is variable: the bank can change it at any time.
Fixed-Rate Savings Bonds: Higher Return, Locked In
With a fixed-rate savings bond, you lock in a sum for a fixed term (3 months to 5 years) at a guaranteed rate. The rate is higher than easy access, but you cannot access your money during the term without penalties.
Direct Comparison
£10,000 invested for 2 years
Easy access (4.0% variable): approx. £816 interest – but rate could fall
Fixed-rate bond (4.6%, 24 months): approx. £940 interest – guaranteed
Difference: £124 more with fixed-rate – but no access to the money
When Easy Access Makes More Sense
- Emergency fund: Always keep your emergency fund (3–6 months' expenses) in easy access – it must be instantly available
- Short-term goals: Holiday, car, home improvements within 6–12 months
- Uncertain plans: If you're not sure when you'll need the money
- Expecting rising rates: Easy access benefits if the Bank of England raises rates
When Fixed-Rate Makes More Sense
- Concrete savings goal with timeline: House deposit needed in 2–3 years
- Rate certainty desired: You want to know exactly what you'll earn
- Expecting falling rates: Lock in today's higher rates for the future
- Money genuinely not needed: The sum can really be locked away for the full term
FSCS Protection
Both easy access and fixed-rate savings are protected by the Financial Services Compensation Scheme (FSCS) up to £85,000 per person per bank. If you have more than £85,000, spread it across multiple institutions.