8 ways to make the most of your savings
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.
1. Make it a Date
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.
2. Be prepared
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.
3. Take aim
Saving is easier if you set yourself goals such as paying for a holiday, Christmas, presents, a car or your dream retirement home.
4. Beat the taxman
Remember that as of April 2016, the new Personal Savings Allowance means that the first £1,000 of interest earned on savings is tax-free for basic-rate taxpayers, and for higher-rate taxpayers, the first £500 of interest is tax-free.
If you’re a taxpayer, you can use Individual Savings Accounts – ISAs - to put your money beyond his reach. You can put up to £20,000 into a cash ISA this tax year – and your partner can do the same. An ideal home for that rainy day reserve.
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.
5. Be a detective
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.
6. Sleep tight
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.
7. Disloyalty pays
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.
8. Beware the inflation dragon
Few accounts pay rates that match, let alone beat, inflation. You'll need to shop around for savings accounts with good interest rates. Otherwise the only sure way to protect yourself is to invest in real assets, such as buying your home - if you can afford to.
What extra money are you entitled to?
Even if you don't think you're due any extra money, it's always worth checking.
A small favour
All the information and advice we provide on the website is free and completely independent, as is our National Advice Line.
But demand is going up. We are an ageing population and more people than ever are coming to us for support, which is why we need to ask for help.
If you are able to, just a small gift today could help us reach even more older people wherever the need is greatest.
For more information call Age Cymru Advice on 08000 223 444