5 Savings Account Alternatives In The UK

Savings accounts are a popular type of bank account. They’re a safe place to store your money, whether it’s for something specific or a rainy day.

But savings accounts aren’t for everyone. Some people don’t want to use a typical savings account for religious reasons. For example, earning interest or riba is considered haram in Islam, so many Muslims opt for a savings account alternative. Other people may not be eligible to open certain savings accounts, while others seek a more ethical approach to savings and investments.

Whatever the reason you’re looking for savings account alternatives, here are 5 of the best ways to save that don’t involve opening a high street savings account.

1. Start a money club

A money club is a type of community pooling club that involves putting money aside with your family and friends. Choose a trusted group of people and set up your own club, or join a club that already exists. Each person contributes the same amount each month. The club organiser then arranges a payout of the total fund to one person every month.

Money clubs are an informal type of pooling funds, so you won’t earn interest on your contributions. But if you’re looking for an ethical approach to planning that uplifts the whole community, this may be the right choice for you. Learn more about setting up your own money club.

2. Join a credit union

Credit unions offer ethical savings accounts. Like ROSCAs, UK credit unions are built around specific communities. To join one, you need to have a common interest with other members of the credit union. If you’re accepted as a member, you can access their savings products.

Credit unions aren’t run for profit, so, like ROSCAs, they don’t generate interest. However, any profit the credit union earns over the course of the year is distributed between members, so you may get a return on your savings.

3. Invest in stocks and shares

If you’re prepared to take a bigger risk with your money, you could consider investing in stocks and shares. A stocks and shares ISA is a good place to start if you don’t have much investment experience.

Investing over the long term often generates more returns than short-term investing or traditional savings accounts. But there’s always a risk that you’ll lose some or all of the money you invest, so choose your investments wisely, and don’t invest more money than you can afford to lose.

4. Take a chance on Premium Bonds

Premium Bonds are a UK government-run initiative that works like a lottery, except that your money is safe — the prizes you can win are earned on top of the money you save. For every £1 you put into a Premium Bonds account, you get a unique bond number. Numbers are drawn on a monthly basis. If your number is drawn, you have the chance to win prizes ranging from £25 to £1 million.

Premium Bonds are considered a very safe place to keep your money, as they're offered by NS&I, the UK’s state-owned bank. But you won’t earn interest, and the chances of winning a prize are extremely low. So you may not get a lot of return on your investment.

5. Open a trust fund

Some people want a place to keep their money until a certain time in their life. For example, you may want your children to access the funds when they turn 18, or use it for your own care as you get older. In these cases, setting up a trust fund may be a good option.

Trusts are legally binding funds that protect your money until the conditions you set are met. It enables you to provide for your family’s future. However, once the money is in trust, you won’t be able to access it again — so be mindful of this before setting up a trust.

Which type of savings account alternative is right for you?

Choosing how to save your money is a big decision. Ultimately, the best choice comes down to 5 factors:

• Your values — whether you want to earn interest and what type of investments you’re prepared to make
• Risk appetite — how much money you’re prepared to risk
• Eligibility — whether you’re eligible for the scheme or account you want to use
• Accessibility — how easily you want to be able to access your money
• Earning potential — the returns you expect on your savings or investments.

Investing is almost always riskier than putting your money in a savings account, whether it’s Sharia-compliant savings or a credit union account. Money in UK savings accounts is protected by the FCSC up to £85,000, so even if your account provider goes bankrupt, you’ll get your money back.

Any money you invest in stocks and shares could be lost — but you could also get a bigger return on your investment, especially if you invest long term.

Make your money club easy to manage

Money clubs are especially popular in minority communities around the UK. And with Bloom, there’s now a simple, convenient way to manage your club from your smartphone.

Find out who Bloom is for and how our app works to learn more.