As with credit card debt, if you have a mortgage and the interest rate is higher than the savings rate, overpaying may be the most sensible place to direct any spare funds. But it’s important to check this out with your mortgage provider first. Whether you can overpay will depend on the mortgage you’ve taken out. 

You should also note that you may not be able to get back these overpayments if at any point you need access to the additional funds. Putting it into an easy access savings account instead means you can get hold of your money quickly, should you need it. 

If you have money to put to one side but you need to be able to access it when you want, you’ll need an easy access savings account. This allows you to make withdrawals without incurring any penalties. They do tend to pay lower interest rates than accounts where your money is locked away but they’re a good option if you think you might need to get to your money quickly. 

If you don’t need access, a fixed rate account may be better. In this type of account, the amount you earn is set or ‘fixed’ over a specific period of time. You can’t usually access your money during this time and if you do, you’ll likely be faced with a large cost to withdraw it. However, your reward for leaving it untouched is typically a higher rate of interest than an easy access account. 

If you can put money aside on a monthly basis, a regular saver might be a good option. This account enables you to save a certain amount of money per month (the maximum amount you can pay varies depending on the product.) These accounts often pay higher rates of interest than other types of savings.

Everyone in the UK has a personal savings allowance but what this amounts to depends on your tax bracket. 

Tax payer status	Interest allowance
Basic rate tax payer	£1,000
Higher rate tax payer	£500
Additional rate tax payer	£0

This means that if you’re a basic rate taxpayer, you can earn £1,000 in interest before you have to pay tax on your savings. However, if you’ve used your personal savings allowance it’s worth thinking about a Cash ISA as you don’t have to pay tax on the interest generated. Because most people don’t pay tax on their savings, it’s usually just a question of which account pays the highest interest rate. You can find out more about when you have to pay tax on savings here.

If you’re a first time buyer saving for your first home, the Lifetime ISA or LISA gives first time buyers an additional 25% on their savings. Anyone aged 18-39 can open one and save up to £4,000 a year - then the government will add a further 25%. 

After 12 months, this money can be used towards the deposit on a residential property costing up to £450,000. Note - if you use the money for anything other than this you’ll pay a 25% withdrawal penalty. 

A LISA can also be used to save for later life. You can find out more about using a Lifetime ISA here.