Money Goals

Eight alternatives to savings accounts

Sep 25, 2023

When it comes to growing your hard-earned money, traditional savings accounts might not always offer the best returns. Luckily, there are lots of alternatives to savings accounts in the UK that can provide better returns and help you hit your financial goals faster. Loqbox looks at eight safe alternatives to savings accounts to make more money.

Savings accounts can be secure and reliable places to store money and earn interest. Lots of people use them as sure-footed alternatives to premium bonds and other money-making options. But what are considered to be better options than savings accounts? Let’s get into it.

8 best alternatives to savings account

1. Stocks and shares

Investing in stocks and shares gives you the opportunity to earn much higher returns, but it also comes with higher risks. When you invest in stocks and shares you are buying a piece of a company and essentially betting on its success. If the company’s worth grows, so does the value of your share. 

Over extended periods of time (at least ten  years), stocks and shares could earn you more than your savings account returns. 

However, they are unpredictable. You could actually earn less or even end up with nothing. If you do dip your toe into investing in stocks and shares, be sure to diversify your portfolio to spread out the risks. 

2. ISAs (Individual Savings Accounts)

If you’re interested in investing, but you don’t want to take the risk yourself, you could consider a Stocks and Shares ISA. These savings accounts invest your money for you. So your returns are based on the success of the stocks and shares. Not only that but your returns are tax-free. You can currently invest up to £20,000 a year in an ISA, although that is spread across all your ISAs in each tax year.

While Stocks and Shares ISAs can give you more powerful returns than a savings account, they are still liable to the same risks as investing. You could end up with less than you started. The cap of £20,000 across all of your ISAs, means that if you want to add more than that you may need another alternative.

There are other types of ISAs that may be a better fit for your savings goal. Lifetime ISAs (LISAs), receive government top-ups of 25% up to £1,000 per year for every £4,000 you save towards your first property deposit or personal retirement fund. Fixed-Rate Cash ISAs offer a fixed-interest rate for a set number of years. While the rates will often be higher than current ones, they’re liable to be lower by the time you cash out.

With all of these options the one thing you’re sure to need to invest in is time. None of them are get-rich-quick schemes. But they can give you better returns than standard savings accounts, so if you have the time to put into your goals, they can be great alternatives to a savings account.

3. Bonds and Premium Bonds

Bonds are often considered to be safer bets than investment alternatives. This is because you are guaranteed to get your initial cash back at the end of the term. The difference with bonds is that you give your money to a company (or to the government in the form of gilts), and they pay you interest as an income across the term.

Bonds are like loans to companies. You don’t own shares in the business, but they pay you interest on your investment and then return the original amount at the end. Unlike stocks and shares, if the company struggles, the money you put in isn’t affected. That’s why it can be a less risky option.  

‘Premium Bonds’ in the UK are a government-run savings alternative that offers a monthly prize draw. The money you put in is very safe, but your returns come in the form of randomly allocated prizes. These prizes can range from anywhere between £25 to £1,000,000 (with no Capital Gains or Income tax to worry about). So you could make a fortune. 

But of course, the chances of winning are really slim and unless you are one of the lucky winners, it’s unlikely your savings will beat inflation using ‘Premium Bonds’. 

4. Peer-to-peer (P2P) lending

Similar to standard bonds, P2P lending is a way of loaning your money and receiving interest payments on your money. The difference is that you can loan your money to individuals, as well as companies. P2P lending is possible via online platforms. The rates of return can be high, but your money isn’t as protected as with other alternatives.

Your money goes into the online platforms in much the same way as a savings account. But they can offer higher returns than standard savings. However, while they’re regulated by the Financial Conduct Authority (FCA), your money isn’t protected by the Financial Services Compensation Scheme (FSCS). 

That means if the online platform providing the P2P lending falls apart, you may not be able to get your money back. People are able to make decent returns on their investment using P2P lending, but it’s important to mention that the projected returns you’re given are never guaranteed. 

5. Crowdfunding

Somewhere between investing and P2P lending, it’s possible to invest in innovative projects or startups through crowdfunding platforms. Depending on the projects you support, and how successful they are, you could see huge returns. However, using crowdfunding as a savings alternative depends on your ability to spot the next big thing. 

6. Precious metals

You could consider diversifying your savings by investing in precious metals like gold and silver, which historically retain value and act as a bet against economic uncertainties. 

Often, when the economy is strong, precious metals drop in value. But in a crisis, they can overperform. Either way, they’re pretty good at retaining their worth.

7. Cryptocurrency

For the tech-savvy, investing in cryptocurrencies offers the potential for high returns, but it's crucial to research and understand the market thoroughly.

The popularity in crypto investments came after a meteoric Bitcoin boom in 2018, but since then it’s been a highly volatile option. There are gains to be made but you can also lose a great deal so you need to know what you’re doing! 

8. Get started with Loqbox Save

If your savings are for a short-term goal, and you’re interested in a different kind of return, why not invest in your credit score while you save? With Loqbox Save, you set a savings target that we lock away as a loan. We report your savings payments to the main credit reference agencies in the UK (Experian, Equifax and TransUnion) and help to boost your credit score!

You can invest in your future by saving towards your goals and be prepared for when they arrive. If you plan to take out a mortgage, credit card or loan in the future, building a better credit history now means the interest rates that you’ll be offered could save you £1,000s in the long run. 

Your credit score will reflect your credit report and how creditworthy the lenders consider you to be, so the higher it is the better the deal you’re likely to be offered. Investing in improving your credit score can bring you great returns in the future.

Improvements to your credit score are not guaranteed.

So, are there really better options than a savings account?

While some of these alternatives to traditional savings accounts come with varying degrees of risk, they also offer the opportunity for more substantial returns. Depending on your financial goals and risk tolerance, you can choose the option that fits best with your aspirations. Happy saving! 

Get a little Loqbox in your inbox

A special email delivery of money saving tips and financial know-how each month