Although some current accounts pay a reasonable rate of interest, you will be a lot better off if you put cash you are setting aside for the unexpected in an easily accessible savings account. In the past the best savings rates were often paid on notice accounts, which required anything from seven days' to six months' advance warning before withdrawing your money, or you risked losing interest. These days, however, rates paid on instant-access and no-notice accounts, which give penalty-free access, are often as good if not better.
You'll get the best deal by putting your spare cash into a cash Individual Savings Account (ISA). This is a tax-free savings account that allows you to save up to £3,000 in cash each tax year without paying tax on the interest. The only drawback is that if you take money out once you have paid in the year's maximum allowance, you can't replenish the account with more cash.
If a cash ISA isn't an option - perhaps because you have chosen to invest the maximum in a stocks-and-shares ISA - the next best home for your money is likely to be an Internet-based savings account, closely followed by one operated by phone or post. For up-to-date information on the best savings rates, check the personal finance pages of the weekend press.
