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For those of us with savings, it’s not a great time. Most deposit accounts pay less than 1%, yet, we still want access to our money when we need it.
But there are still ways to build a savings nest egg and get a worthwhile return on your money. We asked personal finance expert John Husband to give us his tips on making the most of our savings.
To make sure you save regularly, set up a monthly payment into a savings account. Also, whenever you get a pay or pension increase, increase the amount your save - this makes saving near painless.
To work out how much you can save, keep a check of every penny you spend for a month, then set a budget that covers all the essentials and see how much is left.
Your first priority should be to build up a ‘rainy day’ reserve for emergencies. Ideally aim for three months income in accounts you can draw on immediately.
Saving is easier if you set yourself goals such as paying for a holiday, Christmas, presents, a car or your dream retirement home.
He takes at least 20p out of every £1 interest you earn - if you let him.
But you don’t have to. If you’re a taxpayer, use tax-free havens such as Individual Savings Accounts – ISAs - to put your money beyond his reach. You can put anything from £1 up to £15,240 into a cash ISA this tax year – and your partner can do the same. An ideal home for that rainy day reserve.
Other tax-free havens include National Savings Certificates and Premium Bonds – all Ernie’s prizes are tax-free. For regular savings Friendly Society plans are an ideal way to turn small sums into a nest egg for grandchildren.
If your spouse is a non-taxpayer, or pays less tax than you, it’s possible to reduce or even avoid paying tax altogether by putting your savings in their name.
Start by finding the ‘Best Buy’ savings tables in your newspaper, or on money comparison websites.
Now for the detective work. Better rates are offered on accounts operated on the Internet or by phone only. If you ‘re not comfortable with that weed those out.
Many ‘best buy’ rates are inflated by temporary bonuses paid for anything from 3-12 months. Exclude those where the bonus lasts for less than a year.
Now, check what access the account offers. Fixed notice and fixed term accounts pay more, but that’s no good if your money is beyond reach when you need it. So be sure that enough of your savings are accessible in an emergency.
No investment is worth sleepless nights, so don’t put your money with providers you don’t know or are uncertain of, simply because they offer fantastic rates.
Remember the Icelandic banks! If a deal looks too good to be true it usually is.
Few providers offer better terms to loyal customers nowadays. Most sucker you in with a great deal hoping you’ll be too lazy to move your money when the deal ends.
So shop around regularly to be sure you still have the best paying account. If you have one with a temporary bonus put the expiry date in your diary.
Few accounts pay rates that match, let alone beat, inflation. The Government intends to relaunch Index-Linked National Savings Certificates and the last ones offered tax-free bonuses that matched inflation plus a percentage point or so on top. If these offer the same, then grab some.
Otherwise the only sure way to protect yourself is to invest in real assets, such as buying your home - if you can afford to.
Set your location to see what Age Scotland offers in your local area.
The British Bankers’ Association is the leading association for the UK banking and financial services sector. They will be able to help you trace a lost bank account.
Building Societies Association is a trade association, representing mutual lenders and deposit takers in the UK including all 52 UK building societies. They will be able to help you trace a lost building society account.
National Debtline can offer practical advice and support on how to manage debt.
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