UK Savings Calculator

Inflation is the rate at which prices for goods and services increase over time. It effectively reduces the purchasing power of your money as time passes.

For example, if inflation is 2% per year and you have £1,000 in savings with no interest, after one year your money would only buy what £980 would have bought a year earlier.

For your savings to maintain their real value, the interest rate needs to be at least equal to the inflation rate. For your savings to grow in real terms, the interest rate needs to exceed inflation.

This is why it's important to seek savings accounts with competitive interest rates, especially for long-term goals. Our calculator can factor in estimated inflation to show you the real future value of your savings.

The UK offers various savings accounts to suit different needs:

• Easy Access Accounts - Allow you to withdraw money without notice or penalty, but typically offer lower interest rates
• Notice Accounts - Require you to give notice (typically 30-120 days) before withdrawals, usually offering slightly higher rates than easy access accounts
• Fixed-Rate Bonds - Lock your money away for a set period (1-5 years) in exchange for a guaranteed interest rate, often higher than easy access accounts
• Regular Savings Accounts - Require monthly deposits and often offer higher interest rates, but with restrictions on withdrawals
• Cash ISAs - Allow you to save up to the annual ISA allowance (£20,000 for 2025/26) with all interest earned being tax-free
• Lifetime ISAs - For adults under 40, offering a 25% government bonus on savings up to £4,000 per year for buying a first home or retirement
• Premium Bonds - Instead of interest, your savings are entered into a monthly prize draw with tax-free prizes ranging from £25 to £1 million

The best account depends on your savings goals, timeframe, and need for access to your money.

An emergency fund is a financial buffer to cover unexpected expenses or income loss. Most financial experts recommend:

• 3-6 months of essential expenses for those with stable jobs and no dependents
• 6-12 months of essential expenses for those with variable income, self-employed individuals, or those with dependents

Essential expenses typically include:

• Housing costs (mortgage/rent, council tax, utilities)
• Food and groceries
• Transportation (car payments, fuel, public transport)
• Insurance premiums
• Minimum debt payments
• Essential personal and household items

Your emergency fund should be kept in an account that's easily accessible (like an easy access savings account) but separate from your everyday spending account to avoid the temptation to use it for non-emergencies.

Balancing short-term savings goals with long-term retirement planning is essential for comprehensive financial health. Here's a balanced approach:

1. Establish an emergency fund first - Before focusing on other goals, build a financial safety net of 3-6 months of expenses
2. Take advantage of employer pension matching - If your employer offers pension contribution matching, contribute at least enough to get the full match (it's free money)
3. Set clear priorities - Identify which short-term goals (house deposit, car, etc.) are most important and by when you need to achieve them
4. Allocate your savings - Once you know your goals, allocate your monthly savings budget accordingly:
   • Short-term goals (1-5 years): Easy access accounts, notice accounts, or short-term fixed-rate bonds
   • Medium-term goals (5-15 years): Fixed-rate bonds, stocks and shares ISAs for potentially higher returns
   • Long-term retirement (15+ years): Pension contributions, Lifetime ISAs, investment portfolios
5. Adjust as needed - Review and adjust your allocation as goals are achieved or circumstances change

For detailed retirement planning that complements your shorter-term savings strategy, use our UK Pension Calculator. It will help you understand how much you need to save for retirement alongside your other financial goals.