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The Best Options For Your Savings

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Almost 17 million Brits have less than £100 stashed away in savings, according to This is Money. For a lot of us, it’s starting to save and sticking to it, as opposed to having no money to save. It does also depend on where you are in life. A huge 3.5 million of us have no assets and little to no savings. Even if you are one of the 3.5 million, you might experience an unexpected windfall in cash. This could be from prize money to an inherited sum. No matter whether you’re just starting out on the road to saving, or you have a significant amount of cash, here are some of the best options for your savings.

Individual Savings Account (ISA)

You’ve most probably heard of an ISA – a tax-free place to keep your savings. At the moment, the tax-free allowance is £15,240 but it’s set to increase to £20,000 after April this year! Almost anyone can get an ISA – as long as you’re over 16 and a UK resident. Junior ISAs are also available for anyone under 18. An ISA is better for mid or long-term savings of a year or more to get the full advantage out of it. It’s not one for those of you who fancy a high-interest rate. ISAs have an interest rate varying anywhere between 0.8% and 1.65%.

Lifetime ISA

First-time buyer? You’ve probably heard of a regular Individual Savings Account (ISA), which is open to people from all walks of life. But the Lifetime ISA is a new initiative for savers aged under 40 looking to get onto the property ladder. They are also good if you’re looking to build up retirement savings. The government will give you £1 for every £4 saved, up to £1000 per tax year. But there’s just one catch – if you withdraw the money before you turn 60 and you don’t use it for your first home, you’ll have to pay a 5% penalty. You’ll also have to pay back the government bonus and interest earned on the bonus. This is a great opportunity for first-time buyers, but one to avoid for short-term savers.

Personal Savings Allowance

Those of you looking to save in the long-term should look for a high-interest rate for your savings. The Personal Savings Allowance (PSA) launched in 2016 is perfect for regular taxpayers who want to set aside a small nest egg. You can earn up to £1,000 tax-free interest and it really does add up! It doesn’t even matter whether you’re saving long-term or short-term.

Peer-to-Peer Lending

Did you know? You can invest your savings in peer-to-peer lending companies. It’s called an Innovative Finance ISA and can reap fantastic interest rates. It does, however, comes with a risk of losing your money. It’s a novel way to keep your savings locked away, but it’s probably not one for the faint-hearted.

Credit Unions

Credit unions are one of the best options for your savings if you can only afford a small amount per month. It’s a fantastic first step for those of you who haven’t saved properly before. They’re run by cooperatives made up of local people, so there’s a real individual community spirit around saving. Find your local Credit Union here!

Stocks and Shares

Stock markets are, of course, very risky but it can give you huge rewards if you’re feeling daring. Some people use it as a long-term savings tool. Your money isn’t as accessible so it isn’t great for people who want to use their savings as an emergency fund. But if you feel stocks and shares are the way to go for your savings, then you’ll want to take a look at the FTSE100 (a list of the UK’s top 100 companies) and buy shares. The company uses your share as an investment and, if it does well, you’ll get generous profits.

Hiding it Under Your Mattress

Under the mattress, in the freezer, in fake baked beans can – some people really do stash their cash at home. But it’s highly prone to theft, fire, water damage and a lot more. So don’t literally sleep on your money – start taking advantage of savings accounts and investments!

Bank and Building Society Savings

Ideal for short-term savings and long-term savings, banks and building society savings accounts give easy access to your savings and are great for saving up for holidays, Christmas, birthdays and the deposit for a mortgage. Interest rates are usually pretty good, but vary bank to bank (from 2.5% to a huge 5% per annum). If you fancy a change from your regular bank, you can nip down to your local Post Office and open up a National Savings and Investment account.

If you are looking to open up a savings account, there are a few things you should consider.

What Type of Savings Account is Best?

There are so many types of savings accounts available, but which one is best for you? Ultimately it depends on whether you’re looking for a long-term or a short-term option. Here’s a savings account breakdown of the benefits of both types.

Remember the Changes in Personal Allowance

Since April 2016, the new personal savings allowance (PSA) has meant that all savings interest is paid gross, without tax taken off.  Basic rate taxpayers can earn £1,000 per year interest tax-free and Cash ISA’s, premium bonds and other tax-free savings interest don’t count towards that amount.

You Should Try and Pay Off Any Debts Before Saving

If you have debts that need to be paid off, with interest on top, you’ll be better off paying those off before looking to commit money towards long-term savings. Pay off the very poor credit loans first, as the interest rate  is usually higher. It is more cost effective in the long run. Ensure that you are not charged any early repayment fees for finishing your loan term early. If you’re having trouble paying off your debts, take a look at our debt advice page.

Your Current Bank May Not be the Best Option

For some current accounts, there is the possibility of higher rates of interest than with savings accounts at the same bank. It is worth shopping around for the best deal to see how much you could be saving.

Make Sure to Plan Your Monthly Budgets Ahead

A Regular Saver allows you to build up a good saving account through higher rates of interest than your standard accounts. This only works if you are able to commit to a regular monthly deposit which can vary between £50-£100. If you plan out your monthly expenses, you can calculate how much you could save each month.

Fixed Savings For Long-Term Success

If you already have a set amount of money saved and are willing to put money aside for the long-term, a fixed saver (such as a cash ISA) offers a higher rate of interest. However, you can’t access the money for a set period of time without large penalties attached.

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