We know that alongside savings comes some unfamiliar terms and confusing words. So, we’ve put together a short list of some of the most common savings terms and what they mean. It’s by no means an exhaustive list, but it should help you get started on your savings journey.
What does paying interest mean? – Interest is the money that you earn on your savings, which is displayed as a percentage. The higher the percentage, the more interest you get. It is proportional to your savings, so when there’s more money in the account, you get more interest.
What is AER % rate? – AER stands for Annual Equivalent Rate. These help you compare rates across different accounts. A higher AER means more interest paid to you overall. AER is different from interest as it considers how often you get paid interest.
For example, an account that pays 4% interest as 2% every six months will earn you more than an account that pays 4% interest at the end of the year. This is because when the first interest is added to your account, your savings are larger, and therefore the second interest will be higher. The interest that you have already been paid will itself earn interest as part of your savings.
Therefore, the AER on these accounts will be higher to show this.
What is compound interest? – Compound interest is when you are paid interest on previously earned interest. Whatever interest you have already earned from your savings will be added to your account, and so the next time you earn interest, the total will already be higher. Compound interest means that your savings will grow a little faster.
What is the difference between a gross and net interest rates? – Gross interest is the amount of interest you’ve earned before tax is taken off. Net interest is the rate of interest you earn after tax has been paid. Net interest is the amount of money you will actually earn. Unless your savings or salary are on the upper end, it is unlikely you will need to pay any tax on the interest that you earn.
What are variable and fixed rates of interest? – If your savings account has a variable rate of interest, it can go up or down while you own the account. If the account is fixed interest, it will stay the same for a period of time, which providers must be clear how long this period is.
How do interest payments work on a regular monthly savings account? – Each month the amount that you earn is calculated based on the interest rate of your account and how much money you have in your savings at that time. When the amount of savings in your account changes, so does the amount of interest that you earn. If the interest rate is 2%, the total interest you will receive at the end of the year will not be 2% of the amount in your account. This is because interest is worked out each month, and as in the earlier months there will be less savings you will have earned less interest.
Visit the UK Savings Week website
Related Articles
Industry
JUL 31, 2026
Fixed Rate product update
FOR INTERMEDIARY/PROFESSIONAL ADVISORS ONLY. NOT FOR CONSUMER USE.
Community
JUL 27, 2026
Member Notice – Harpenden Online and Broker Online scheduled maintenance
Latest News
JUL 10, 2026
Harpenden wins ‘Best Local Building Society’ at the 2026 What Mortgage Awards
Harpenden Building Society wins ‘Best Local Building Society’ for the 12th year in a row, as well as being marked ‘Highly Commended’ in the ‘Best Specialist Lender’ and ‘Best Large Loan Lender’ categories.
Industry
JUN 09, 2026
Harpenden launch Expat mortgages
FOR INTERMEDIARY/PROFESSIONAL ADVISORS ONLY. NOT FOR CONSUMER USE.
Community
MAY 20, 2026
Jon’s Savings Blog – ISA Changes in 2027
There’s a famous saying: “The best time to plant a tree was 20 years ago. The second‑best time is now.” Well, when it comes to ISAs… the tree is about to get a little smaller.
Industry
APR 22, 2026
Member Notice – Staff training 23rd April
Latest News
APR 17, 2026
A Q&A with our CEO Tracie
Here’s a quick Q&A from our CEO Tracie Meadows diving into our new rebrand.
Industry
JAN 22, 2026
We celebrate our new branch opening in Harpenden
We are thrilled to announce the launch of our brand-new branch, located right on the High Street, in one of the busiest areas of Harpenden. The doors opened on the 15th of January, with the event being kicked off by celebrations and excitement from colleagues and members alike. Local members were offered the chance to visit and be a VIP guest to see the grand opening and were greeted by some food and hot drinks while they got to have a look around the new branch or ask our branch team any questions that they had. It was lovely to see so many members come and show their support for us. Also there to show their support were colleagues from the Harpenden Hopper, a local charity that we have supported for a few years. We were also joined by both the Mayor of Harpenden as well as our local MP. After some lovely speeches from our Chair and the Mayor all about the community-focus of the branch, the ribbon was cut, and our new Harpenden branch was declared officially open. You might notice a refreshed look to our brand both inside and outside the building. Our new branch aims to deliver confidence to our members. Being a mutual, our focus will always be about putting our members first. The branch is a nod to our heritage within Harpenden, as well as our renewed commitment to the community and our members. The customer experience is always at the front of our minds, and the new branch has been designed with this in mind. The colourful interior, while looking refreshed and playful, creates a welcoming atmosphere for our friendly branch team to help customers in the best way they can. This branch also comes with a technical upgrade, with iPads and digital screens to aid in the member's experience. With these new upgrades, we can assure our members that the clarity and trust they hold with the Society is still there and isn't going away any time soon. Our branch colleagues are as can-do and helpful as ever, but with a larger and more prominent location, we are setting our sights on an improved future. Tracie Meadows, the CEO of Harpenden Building Society said: "We at Harpenden Building Society always put our members first. Our new branch is just that. It's us giving back to our members and the community in Harpenden." She continued that, "We're giving our customers a better experience, while still being the friendly building society that's always ready to lend a hand. We want people to leave the branch feeling confident in us, and in their financial decisions." Our new Harpenden branch represents an exciting next step for the Society, and is just the beginning - there's definitely more to look forward to in the future.