You don’t need to be Alan Titchmarsh to know that a flower needs soil, sunlight and water to flourish. In the very same way, you need to nurture your savings if you want them to grow. Sit on a flower and it won’t blossom; sit on your savings and neither will they.
Ultimately, your savings are an investment for your future, and possibly your partner’s or children’s futures, too. So, you want to grow them towards the best return for the money you have.
If all of your money is locked up in a savings account, it’s unlikely to be yielding the highest returns. Low interest rates are plaguing savers in the current climate; and if returns are really low, there’s a risk of inflation chipping away at your deposit value.
So, if you want to make the very most out of your savings, here are some other options to consider:
Consider opening an ISA
First up, you could open an Individual Savings Account (ISA) – if you haven’t already, that is. Unlike standard savings and current accounts, ISAs guarantee tax-free returns on your interest (thank you very much). But there’s an annual limit, which stands at £15,240 for the 2016/17 tax year.
For greater gains (but more risk), you could consider a stocks and shares ISA, where your money is invested in things like company shares, investment trusts or Government bonds. Then there are Flexible ISAs, which allow you to take money out and replace it tax-free; Help to Buy ISAs for first-time buyers; and Innovative Finance ISAs, where you can invest in companies via crowdfunding websites.
Your best option will depend on your financial situation, and the level of risk you’re willing to take on. The value of Stocks & Shares ISAs can go down and you may get back less than you invest.
Got an ISA? Then use your allowance!
One step ahead of us? Very well. But are you reaping the full benefits of your ISA? Apparently just 16% of savers are, revealed a Barclays study conducted in March this year. According to the results, savers are losing out on nearly £1 billion in ISA earnings a year by not taking advantage of their Cash ISA allowance. If you have cash savings in other accounts that aren’t generating enough interest or benefitting from tax-free growth, you may want to consider moving it to your ISA. Unlike the lotto, your allowance won’t rollover, so you have until 5 April 2017 to save as much as possible. Go, go, go!
As a nation, we’ve become more frugal – always on the hunt for the best deals, whether it’s car insurance, phone contracts, or toilet roll multipacks. But are you equally as scrupulous with your savings? If you opened an account through your bank because it was the easiest thing to do, then you could be missing out. Shopping around, and comparing a range of deals, is the only way to guarantee the biggest bang for your buck.
Save regularly and be rewarded with high rates of interest – sound good? If you commit to always banking some cash on payday, some current accounts offer up to 5%* in annual interest provided you pay in a minimum each month. It’s a good way to develop good spending habits but you need to be dedicated – i.e., you need to stick at it longer than your New Year’s resolution to benefit.
Consider a tracker account
Ever felt hard done by by a provider that didn’t pass on interest rate increases? To avoid a repeat, you could consider opening a tracker account. It’s exactly what it says on the tin: an account that tracks the Bank of England base rate and kindly passes on rises to savers. And that of course means higher returns!
Beware of the bonus
If you took out an account with someone who offered an unbeatable introductory deal, but now that deal is nearing its end, you should consider parting ways. It won’t be an emotional farewell, at least not for you anyway, as you may be able to take advantage of a better deal elsewhere.
Jot down the dates of when any bonuses end in your diary. That way, you’ll know when to start scanning the market for the next offer.
It’s true: we all want to make our money go further. By spending time assessing your individual circumstances and weighing up the wealth of options available, you can be sure that you’re making the very most of your savings.
We’ve based the information in this article on our understanding of HM Revenue & Customs practice as at November 2016. Tax rules are subject to change in the future and depend on your individual circumstances.
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