The pros and cons of saving
From easy access saving to tax-friendly cash ISAs, there's no shortage of savings accounts on the market - each with their own advantages and restrictions.
Easy access accounts may not always offer the best interest rates, but they do provide the flexibility to take money out whenever you need it - vital for those day-to-day expenses.
Other accounts are geared more towards saving than spending. Many offer a more generous (and often fixed) interest rate on the proviso that your money is left untouched for a set period of time.
In either case, your money is safe in the bank (or building society). It's protected by the Financial Services Compensation Scheme up to the value of £85,000 should your financial provider collapse.
The impact of inflation
In a low-interest savings account, there is a risk that your cash savings may struggle to keep pace with inflation.
In other words, even though your cash balance is steadily increasing, your money may be worth less in real terms as things get more expensive to buy.
To illustrate this, think of two shopping baskets of identical goods - one basket paid for in 1995 and the other paid for today.
Even though the items are the same, you'll pay a lot more for the items today - showing how the money you hold onto as cash can slowly lose its buying power over time.
You can see the potential impact of inflation on your savings in our handy inflation calculator.
