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Fixed rate bonds are savings accounts with a difference. To start with, these accounts are more like investments rather than savings accounts, and with all investments comes risk, but equally risk can mean higher returns.

The good thing about fixed rate bonds is that as long as you stick to your providers maximum compensation limits, you are only actually risking the potential interest earned, which makes fixed rate bonds a very safe investment

Unlike an instant access savings account that has lots of activity with constant withdrawals and deposits, bonds generally only allow you to make a single lump-sum deposit, with no additional deposits throughout the rate. Earl withdrawals – though possible, will result in penalties such as having your interest capped or in some cases closing the account completely.

The point of a fixed rate bond is to encourage you to leave your savings to grow, and this can be achieved if you leave you're money alone, and make sure you fix an interest rate that is above the Bank of England Base rate. This is because inflation is used to measure the increase in price, so anything below it would effectively cause your money to erode. Once the term reaches an end you are able to access your balance with the added interest.

The main elements of a bond account are the fixed term – this is the period of time you agree to lock your money away for, and the fixed rate – this is the rate at which your interest will be earned.

Another difference between fixed rate bonds and instant access accounts is that that the rate offered upon opening the account will not fluctuate to reflect changes made to the Bank rate. This means that your rate will never change, allowing you to calculate exactly what you will earn.

This can be a good thing, as locking in on a high rate will keep your returns high, and should the base rate fall, you can benefit from high interest rates at a time that other savings accounts are paying less.

Last year saw the economy suffer a big blow, which resulted in rates being slashed in an attempt to stimulate the economy by reducing some mortgage holders, and encouraging lending. This had a big effect on the rates offered on savings accounts, so anyone that opened a fixed rate bond account before October would be feeling very smug.

This can also work the other way, as you could lock in on a rate, then soon after see rates rise, while you are left behind earning under the odds on your savings.

By monitoring recent base rate trends, you can make predictions on whether the base rate is likely to rise or fall. Many clever savers took advantage of the credit crunch by spottin a trend in falling interest rates and locking in on a high rate to avoid falling rates. Some economists have predicted further cuts to The Bank of England throughout 2009 and if this is the case, it may be wise to avoid further losses to returns on your investment and fix your rate using a fixed rate bond.

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