How to grow money in your savings accounts in three easy steps

A recent report produced by Flagstone showed that one in three UK savers felt they couldn’t make money from their cash. But your savings can be so much more than a financial cushion, provided you take the right approach.

In this series, you’ll learn how to wake up your savings to maximise your financial earnings. This article will cover the two basic ways that you can make money grow and discover three practical steps to transform your cash into a financial asset.

How to grow money

There are two essential ways to grow your money. Buy something that increases in value or earn interest on a deposit.

Investing for a profit

Buying to benefit from an increase in value is known as investing. You can invest in:

• items such as precious metals like gold (called ‘commodities’)
• companies by buying a percentage of their shares

In the UK, you can open a special type of account that allows you to buy shares without getting taxed on the profits. This is called a Stocks and Shares ISA.

Nobody knows what the future holds. This means, when you invest, you can risk losing the amount you pay in.

You’ll learn more about financial risk in the second article in this series.

Earning interest: understanding the basics of saving

Most of the time, you don’t have all the money you need to create things upfront. This means that everyone from businesses, to homeowners, to governments need loans to get started, which they usually receive from banks.

When they borrow money, they pay the bank a fee, called ‘interest’, based on how much they’ve borrowed. In return, the bank pays you a share of this interest for keeping your money in a savings account with them.

Depending on who you bank with, and the type of savings account you have, your cash can earn money without you needing to do anything. But some financial factors can slow things down.

What stops you growing your money?

There are lots of factors that can stop your money from growing, but two of the root causes are inflation and low interest rates.

Why inflation stops your money growing

Currencies change value constantly for complicated reasons. But at the most basic level, prices tend to rise over time, meaning your money gradually loses purchasing power. This is called ‘inflation’, and it means that the cash you have today won’t buy as much in the future.

Some inflation is normal and even helpful. This is because when money increases in value, it can stop people selling what they own in the hope of making more in the future. This can slow down the economy, sometimes with lasting damage – just like we saw during the COVID-19 pandemic.

The result of this is that even when the economy is doing well, your money will be worth less if it doesn’t grow faster than the rate of inflation. High-interest rates can help offset this.

Why low-interest rates stop your money growing

Your interest rate tells you how much you’ll get paid by the bank for leaving your cash with them in an account. The higher the AER (Annual Equivalent Rate), the more you get paid.

Interest rates vary from bank to bank. If you have a lower AER, your money will grow slower than if you opened an account elsewhere.

Three steps to grow money in a savings account

1. Research the best interest rates

Banks advertise rates to entice people to open savings accounts with them. But you can save time and effort by using tools that compare accounts side by side. Savings platforms like Flagstone even offer exclusive rates with banks.

2. Make regular deposits each month

Thanks to compound interest, regularly adding to your savings helps your money grow over time. Automating your deposits – by setting up rules in your banking app to move money as soon as you're paid – makes saving effortless.

Consistency is key. Small, steady contributions add up faster than you’d expect.

You can also structure your savings accounts so that you achieve the highest possible return. We’ll cover that technique later in this series.

3. Switch bank accounts for better rates

Most UK savers keep their cash in an account with the same bank as their current account. Four high-street banks control 75% of the UK savings market – often offering low-to-no interest. This means £1.5tn earns less in interest than the Bank of England’s 2% inflation rate.

In banking, customer loyalty rarely brings meaningful rewards. Switching accounts for better rates is one of the best ways to grow your savings.

Tools like Flagstone let you apply once and spread your cash across multiple accounts. If you have over £85,000 in savings, spreading your money across banks helps protect it under the FSCS guarantee.

Frequently asked questions on how to grow money through savings

Is there a downside to opening a savings account?

No, especially if you choose a high-interest account. It’s true that your money is likely to grow more slowly than it would if you put it towards higher-risk investments, but this is why creating a balanced financial portfolio is important. This means you can open a high-interest savings account and grow your wealth through investing at the same time.

Does opening a savings account affect your credit score?

In most cases, no. A ‘soft’ credit check can verify your financial situation without hurting your credit score.

You’ll only get a ‘hard’ credit check if you apply for credit or a loan. With a savings account, you’re the one providing money to the bank.

The exception to this is when the bank gives you an overdraft, which means you can borrow money from the bank if your balance goes below zero. Not all accounts offer this, so it’s worth deciding if you need an overdraft before you apply.

How to grow money with high-interest savings accounts

Growing your money is essential to securing your financial wellbeing for the long term. Provided you open the right savings accounts with a high AER, make regular contributions, and consider switching to better banks annually, you’ll be in a strong financial position in the future.