Most people work out how much they need, save it up, and then leave it in the current account it was saved into. Where it sits is the part that gets skipped.
Three things decide whether an account is the right home for it.
If it fails any one of these, it's the wrong home for this money, however good it looks on the other two.
No notice period, no penalty for withdrawing, no waiting for a term to end. This rules out fixed-rate bonds and notice accounts, whatever their headline rates look like. It also rules out a Stocks and Shares ISA with investments in it, where the money might be worth less on the day you need it.
Up to £120,000 per person, per banking licence, backed by the UK government scheme. Check the licence rather than the brand. Some banks share one, so £120,000 split across two names can still be a single limit.
Cash in a current account at 0% or 1% loses real value every year. That's not an argument against holding cash. It's an argument against holding it badly, and it's the rule most people fail without noticing.
Savings rates change often, so this is a snapshot rather than a permanent recommendation. It gets reviewed, and if a more appropriate account comes along this section changes. Judge it against the three rules above.
OakNorth is a business lender. It lends to established UK companies such as hotels, care homes, nurseries and manufacturers, and funds that lending with savings deposits. No branches to run and no current accounts to subsidise, which is why the rate is competitive. It has been profitable every year since its second, which is uncommon for a bank founded in the last decade.
The catch: the headline rate includes a bonus for new customers that lasts 12 months. After that it pays the underlying variable rate, which is low enough that this may stop being the right answer. Set a calendar reminder for month eleven.
Rates change. Always check the live rate and terms before opening anything.
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Same money, same access, different account. Here's what the difference works out at over a year.
| Emergency fund | At 1% | At 4.14% | Difference |
|---|---|---|---|
| £3,000 | £30 | £124 | +£94 |
| £5,000 | £50 | £207 | +£157 |
| £10,000 | £100 | £414 | +£314 |
| £15,000 | £150 | £621 | +£471 |
Illustrative, assuming the rate holds for a full year. 1% is roughly what a typical high-street instant-access account pays. Not an offer or a forecast.
Not sure how big yours should be? Work out the number in about a minute. The 3–6 month rule is wrong for most people.
The accounts paying the best rates are rarely the ones on the high street, and a rate that beats your bank's should make anyone ask why. Usually there's a dull answer.
Challenger and specialist banks tend to have no branch network, no free current accounts to subsidise, and a real need for deposits to fund their lending. Paying savers properly is the cheapest way to get those deposits. It isn't a gimmick, just a different business model.
Three checks before trusting one with the fund:
Check the Financial Services Register at register.fca.org.uk. A savings app that isn't a licensed bank is a different proposition, and the protections differ.
The FSCS site confirms which brands share a licence. Two names under one licence share a single limit, which catches people out.
Published accounts, a track record of profitability, and how long it has held its licence all tell you something. FSCS protection means the money is safe regardless, but a bank in trouble is still an administrative headache you don't want during an actual emergency.
Trading 212 and others pay interest on uninvested cash once you opt in, and the rates are in the same ballpark. So why not keep it all in one place?
It's a reasonable question, and on headline numbers there often isn't much in it. Two things argue for keeping the pots apart.
Enabling interest at a broker typically moves the cash into qualifying money market funds, which are short-term lending to banks and institutions. Low risk, but not the same as a deposit sitting in a bank, and the FSCS position isn't identical. For money whose entire job is being certain, that difference is worth something. Check how cash is held and protected before deciding either way.
An emergency fund parked in an investing app tends to get deployed on a dip. Holding it at a separate bank adds a deliberate step before you can spend it, which is useful when the market is down and you're feeling brave.
None of which makes broker interest a bad thing. It's a good home for money that's about to be invested. It's just not where the cash that stops you selling shares in a bad month belongs.
Better to know these now than in month thirteen.
Most competitive easy-access accounts pay an introductory boost for new customers, then drop to a much lower underlying rate after a year. That isn't a reason to avoid them, because the boost is real money. It's a reason to set a calendar reminder for month eleven and compare the market again. Rate switching once a year takes an afternoon and is worth more than most people expect.
Most of the best-paying accounts have no current account, no debit card and no switching service. You fund them from an existing bank and withdraw back to it. For an emergency fund that suits it well, since the money is harder to dip into.
Fixed-rate bonds and notice accounts almost always pay more, and that will be tempting. Money you can't reach for 12 months is not an emergency fund. Fixed terms are for cash with a known date: a tax bill, a house deposit, a wedding.
£120,000 per person, per licence, not per account or per brand. Anywhere near that, spread it across separate banking groups rather than separate accounts within the same one.
If it holds a full UK banking licence and is FSCS protected, deposits are covered up to £120,000 per person, per licence, regardless of the bank's size or profile. Check the Financial Services Register and the FSCS site rather than going on brand recognition.
With a genuine easy-access account, withdrawals go back to a nominated bank account without a notice period or penalty, usually within a working day or two. Timings vary by provider, so check the specific terms.
Usually not. Unless you're at real risk of paying tax on savings interest, the ISA allowance is better spent on investments, where the tax shelter is worth far more over time. Most people's savings interest falls inside the Personal Savings Allowance anyway, so a standard easy-access account costs nothing in tax and leaves the allowance free for the portfolio.
Yes. An emergency fund is what stops you selling investments at a loss when something goes wrong. Once it's funded, the money above it is what goes into the portfolio.
You can, and it'll be perfectly safe. It'll also earn close to nothing while inflation erodes it. The table above shows what that costs on a typical fund.
Same money, same access, meaningfully more interest. The only thing that changes is which account it sits in.
Open an accountCheck the current rate and terms before opening anything.
Affiliate link. Opening an account through this page may earn a commission at no additional cost to you. Educational and informational purposes only, not financial advice. Rates quoted were correct at the time of writing and are variable, so always check the current rate, terms and FSCS position on the provider's own site before opening any account. Capital is not at risk in an FSCS-protected savings account, but inflation may reduce the real value of cash over time.
