Saving made Easy
Saving isn’t always easy, and it’s made even harder by the confusing number of savings products available. Bonds, shares, savings accounts, ISAs – they’re all part of the vast web of ways to save your money – but which is best for you? Each saving product really suits different circumstances depending on how long you want to save for, exactly what you want to save for, and how regularly you wish to save. If you want to start saving up for something, but don’t really know where to start beyond setting up a bog standard savings account, then this article should be able to give you some tips.
Saving Rule Number 1
The golden rule about saving and investing is don’t save if you have outstanding debts. Personal debt, as accumulated on credit cards and loans, normally has a greater amount of interest attached to it than what you can earn on a savings account. With this in mind, its best to pay off your debts first. Once paid off, you can start to earn money in a savings product, rather than pay money to your creditors.
Bog standard savings accounts are handy to have, but rarely are they the best way to save your money. Basically you can have one connected to your current account, and then shift money into it as and when you want. Normally you will earn a better rate of interest than in a current account. However, be aware that interest rates on savings accounts aren’t great at the moment, and you will be taxed on any interest you accrue. If you’re searching for savings accounts with good interest rates connected to a current account, then take a look at Alliance and Leicester for benchmark rates and a pretty wide selection of savings accounts.
Broadly speaking, an ISA is a tax free savings account. This will mean you will generally get a better return on one of these than a bog standard savings account. There is a catch though – you can only deposit £3600 each tax year into an ISA, meaning it’s not the greatest product if you have a large deposit you want to earn interest on, or you’re looking to save more than £300 a month.
Fixed Rate Bonds
In basic terms, a bond is a sum of money that youlend to a financial institution for a fixed term, then when the term expires you get the sum back with interest. Terms can last anywhere between six months and five years – sometimes longer. The benefit is that in times of falling interest rates, you will be guaranteed a pre-agreed interest payment. Sometimes bonds also pay higher amounts of interest than savings accounts, but again you will be taxed on the sum.
Out of all the ways to save, stocks and shares are what confound the greatest amount of people. If you are looking to save for your pension, then your pension fund will almost undoubtedly be a stock market based investment plan, but it will normally be overseen by a professional fund manager. However, pension funds cannot always be accessed until retirement, so it is sometimes attractive to invest in stocks and shares yourself. The golden rule to remember is that it’s for the long term. Usually you should be prepared to invest your money for a period of five years or more to get a good return. Also, make sure you put in plenty of research before making stock picks, and that you maintain a diverse stocks portfolio.