Bank account 'gives you enough to pay for a week's holiday'

Your savings interest could pay for a holiday, according to new analysis

New research has found that some savings accounts are now paying enough interest to cover a week away in the sun. Market analysis by peer-to-peer real estate investment platform, easyMoney, found that the average annual ISA returns received by UK savers over the past 12 months were enough to pay for a seven-day package holiday.

Those who opted for one certain type of ISA are well on their way to affording something a little more luxurious. easyMoney analysed the average annual returns for various categories of ISA over the past year to see what kind of holiday savers could pay for with their interest payouts after investing their full annual ISA allowance of £20,000, and how this measures up against the average price of a holiday, using data from the Post Office, Nimblefins and Which?.

The average seven-night package holiday costs £851, an amount easily covered by the past year’s ISA returns. easyMoney’s analysis reveals that the average two-year fixed-rate Cash ISA, opened in June 2023, generated annual returns of 4.42%.

With a £20,000 investment, this is a cash return of £884 - more than enough to cover a one-week package holiday abroad. The one-year fixed-rate ISA option, with an average return of 4.36%, also generated enough to cover a package trip with annual returns of £872.

Stocks & Shares ISAs have struggled to match the returns of Cash ISAs over the past year. But with an average interest rate of 2.8%, a £20,000 investment would still generate returns of £560 which is more than enough to pay for a two-night city break in a three-star hotel which comes at an average price of £301.

But what if you’re looking for something more special than a seven-night package holiday? What if, for example, you want to take a full two weeks away in a far-flung destination?

If that’s what you’re after, the best savings option is the Innovative Finance ISA (IFISA), according to easyMoney. In 2023, the average rate of return on an IFISA was 5.4%.

With a £20,000 investment, this brings an annual cash payout of £1,079. The average price for a two-week long-haul holiday is £2,265. So, by saving your IFISA returns for just two years, you could pretty much pay for the holiday of your dreams.

Jason Ferrando, CEO of easyMoney, said: “Everyone has a different motivation for saving money in an ISA. For some, it’s about saving for retirement, others want to buy a house. But for a lot of people, it’s about making their money work for them in order to create additional income that can be spent on getting the most out of life.

"Getting away on holiday every year is something that many of us look forward to, but with the cost of living running so high, and income struggling to keep up with the increasing expense of day-to-day life, many feel they can no longer afford to spend hard-earned salaries on what now feels like a luxury.

"But putting your savings into an ISA account, be it a traditional Cash ISA or the increasingly popular IFISA, enables you to create additional wealth for yourself that you simply wouldn’t have by keeping your money in a current account.”