Choosing a savings account can feel confusing because there are so many different accounts available. Shop around and do your research to get the best deal.
Look at the tables in the personal finance sections of newspapers or visit money comparison sites to find the best current rates.
Review your savings accounts regularly to check whether the rate of interest being paid is still competitive – interest rates often drop sharply after the first year and so it pays to move your money to a new account. The interest rate of an account is often linked to how long you save your money for. Some accounts let you take out your money whenever you want, but for others you may have to give notice to take out money without incurring a penalty, or not be able to make a withdrawal until the end of a fixed period.
All individuals can invest a certain amount of money in a cash Individual Savings Account (ISA) each year. Cash ISAs often offer a higher rate of interest than other savings accounts and the interest is paid free of Income Tax.
Interest on most savings accounts is paid with 20% Income Tax deducted. If you don’t pay tax, you can fill in a form from your bank or building society to arrange for the interest to be paid without this deduction. Even if you are a tax payer you may be able to reclaim part of the tax.
An independent financial adviser may be able to help identify how to arrange your savings and investments for the best return while restricting risk to a level you are comfortable with. Being called ‘independent’ does not necessarily mean that an adviser has access to all companies in the marketplace. Check what‚ if any‚ restrictions your adviser operates under and also how their fees are covered. Visit www.unbiased.co.uk to find an adviser.
Any plan should take account of your particular circumstances. It is usually better to reduce any debts before concentrating on increasing savings.
Remember, you may need to use some of your savings at short notice so beware of tying up all your money in long-term investments. Always keep some money in a ‘rainy day’ account where you can withdraw it when you need it.
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