Beware of these 5 terrible savings traps!

If you want to build up your savings in 2010, watch out for these five traps which could ruin your nest egg.

It's the start of a New Year and an excellent time to get into a good savings habit.  If you're not quite sure where to start, the best thing you can do is join other lovemoney.com readers who are all busy getting to grips with our Build up your savings goal.

Follow the tasks set out under this goal, and you'll be on the right track for saving up a decent nest egg by the end of the year. But along the way you should beware of savings traps which could really destroy your return. Here are five of the worst...

1. Watch your bonus

An introductory bonus is way of topping up the rate you earn on your savings, but it can be something of a double-edged sword. On the plus side, if the bonus is fixed it guarantees you with a minimum return for a set period. In today's low interest environment, this certainty has become pretty valuable. However, if the bonus is variable - which many of them are - it doesn't guarantee you anything.

But by far the biggest problem is that the bonus - whether fixed or variable - will always disappear eventually. Many of the best easy access savings accounts come with bonus that lasts for a year. This often makes up a very large part of the overall rate, so once the bonus has gone, the return you're left with could be really dismal.

If you choose an account with a bonus, you'll almost certainly need to move your savings after 12 months have passed. But you can do that quite easily when the time comes by comparing accounts at the lovemoney.com savings centre.

2. Don't be caught out by tiered rates

If a savings account offers tiered rates, then the savers with the biggest deposits usually earn the best returns. But the trouble is, these accounts often advertise the seemingly attractive headline rates only. On closer inspection, you'll find this top tier rate is only available to a select few big savers, and not your average account-holder. How annoying.     

Fortunately, most easy access savings accounts adopt a one-rate-fits-all approach, but tiered rates are more commonly found on fixed rate bonds. Nationwide, for example, pays tiered rates on its e-Bonds. The 2 year version offers a reasonably competitive headline rate of 4%. But you'll only earn that if you deposit a whopping £50K. Savers with between £1 and £9,999 to put away will get a far more disappointing 3.25% - just a 0.1% higher than the best easy accounts.

When you shop around for a new savings account, don't be drawn in by such high exclusive returns. Make sure you check out exactly what rate you'll be getting before you apply.

3. Beware of withdrawal restrictions

I know the idea is to build up your savings as much as you can, but sometimes emergencies happen which force you to dip into your cash. If you have a true easy access account, then you should be able to make as many withdrawals as you need to without incurring any nasty penalties.

But it really amazes me what passes for "easy access" these days. Unbelievably, I've even seen an account marketed as such by Coventry Building Society which only allows four no-notice withdrawals per year. Further withdrawals trigger a loss of 50 day's interest, which would wipe out a large part of your annual return in one fell swoop. Of course, four withdrawals a year might meet your requirements perfectly well, but that's not what I'd call easy access.

So make sure you look out for tricks like this when you hunt down a new home for your savings. And remember easy access savings accounts don't always do what they say on the tin!

4. Beware of best buys

Whenever we write about savings accounts here at lovemoney.com we normally cover off the latest best buys, of course. But the trouble is what might be a best buy today, may not necessarily make the grade tomorrow.

If you really don't have the time or inclination to keep shopping around for the best deals, you might be more interested in accounts which offer consistently good returns over time rather than the highest rates of the moment.

You can compare accounts on the basis of consistency using tables put together by lovemoney.com partner, Moneyfacts. For online easy access accounts check this table and for no notice accounts check this table.

5. Keep an eye on your rate

On the other hand, if you don't mind moving your savings once in a while, there's nothing wrong with choosing a best buy account. But remember the market-leaders don't usually top the tables for long when better accounts are continually being launched.

You may need to check the rate you're earning on your savings more regularly than you might think. After all, why go to the effort of finding the most competitive account at the start of year, if you don't keep your eye on the ball? You could find the rate you're earning has dwindled by the end of the year and seriously lags behind the new best buys.

Remember banks don't always notify you when interest rates changed, so it's down to you. If your rate is cut, vote with your feet and switch accounts sharpish.

Finally, if you're struggling to find enough spare cash to put away, don't despair. Take a look at our How to... save when you've got no money video. And for more hits and tips on how to get the nest egg you've always wanted, head over to Q&A and ask other lovemoney.com readers for help.

Compare savings account at lovemoney.com

More: Get the best savings account | Be a savvy saver in 2010