Have you thought about fixing your money?

Whether you are newer to the world of savings and savings accounts or an old pro with savings, you will almost certainly have heard the term 'fixed' mentioned when people talk about saving.

Fixed accounts work in a very simple way; the account will hold your money for a fixed term, for example one or two years, with a preferential rate of interest that will not vary for the life of the account. These fixed term accounts are offered as they are beneficial to both the saver and the financial institution.

It benefits the saver as it allows them to have a better rate of interest than that of a variable account, guaranteeing the saver a larger amount of profit on their savings at the end of the term. It benefits the financial institution or bank as it gives the bank guarantees over your continued business with them, allowing them to hold greater amounts of money in the process.

However, the downside to this method of saving is that the money you invest in a fixed account is then locked in for the duration of the account's life. Therefore an interest penalty will be incurred if you have to close your account before the term ends (you will never lose your capital, the amount of money you have originally invested cannot be taken away from you). This means that you should only fix money in a fixed term savings account if you are certain that you will not need the money for the duration of the account.

Fixed term accounts can vary in length, from six month bonds to five year fixed savings accounts, so this will allow you the flexibility of being able to choose how much money you would like to invest and for what length. For example, if you are waiting to buy a car and you have the money saved, you could make more money by placing the funds in a shorter term fixed savings account, allowing the money to accrue interest. For this type of saving, a six month account would be better because at the end of the six months your money would be returned to you ready to purchase the car with.

There are two types of account that can come fixed; bonds and ISAs.

An ISA account will allow you to invest up to £,300 a year without being taxed on the interest for that sum of money, meaning you will get a larger proportion of your interest back at the end of the term. If the ISA is fixed then the interest rate will also be fixed, giving you an even greater interest return at the end of the account term. The fixed rate ISA account is available at most banks and they should be able to re-designate your original ISA account into a fixed rate ISA without having to close and reopen any ISA account you currently hold.

Savings bonds accounts are, by very definition, fixed accounts. Bond accounts are accounts with a specific fixed length (from six months upwards) that will allow you to place your money in to receive a fixed rate of interest for the length of the account. At the end of the term the money is returned to you along with the interest. As the account is fixed, holding your business with the bank for a longer term, you should find that savings bonds hold a greater rate of interest than most other savings accounts, making them a sensible move in saving as you will receive a greater amount of interest.

As previously stated, be sure to only invest money that you will not need for the length of the fixed term as it can be difficult to get the money out of the account once it has been fixed. Fixed accounts offer preferential rates because the money stay there, the removal of this money would break the terms and conditions of the fixed account, leaving you with little or no interest to show from your savings efforts.

Shopping around for the best offer will ensure a greater amount of interest.To decide on the best fixed rate savings account for you, it is always worth checking on comparison websites as different banks will have different savings offers at different times.A walk up and down your local high street may also help as banks often advertise their best savings account rates in their windows in a bid to get your business.