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Three Types of Savings

If you’re looking to save, then you’re on the right track to taking control of your financial future. But simply putting your money under your mattress isn’t really enough – there’s plenty of ways to get more from your money. Even putting your cash into a savings account probably won’t give you the best return, particularly if you simply pick the first one your bank offers you. Instead of doing this, you should consider the range of different savings products out there, and determine which one would be right for you. There are regular savings, ISAs and savings accounts to consider, all of which will be explained in this article.

Savings Accounts
Savings accounts are the simplest savings products to get your head around. They’re simply a type of bank account that (usually) has a higher level of interest than your current account, where you deposit cash to gain interest. Typically, you can deposit and withdraw without a penalty, although sometimes you may have an interest penalty if you withdraw – make sure you check this with a provider before you sign up to the account. You can also get a regular saver where you put fixed amounts in for a limited time, and when this time expires, you get a high interest payment – it’s unlikely you’ll be able to withdraw from this type of account though. For savings accounts, take a look at Alliance and Leicester.

ISAs
ISA stands for ‘Individual Savings Account’ and they are similar to savings accounts, but they are tax free. Therefore it’s likely that you’ll get a better return on your interest than with a regular savings account. The drawback is that the maximum amount of cash you can invest in them during the tax year is £3,600. You can also invest a further £3,600 in shares, or if you don’t want to invest any cash, then you can put £7,200 in shares (£7,200 is the maximum you can invest during a tax year). So, because you don’t get taxed, getting an ISA is always a good option if you want to save, even if you want to save more than £7,200 a year, you should take up your allowance.

Fixed Rate Bonds
Fixed rate bonds are effectively savings accounts where you put your money in for a fixed amount of time, then have that returned at the end of the time with a fixed interest payment on top. They can often give higher interest rate returns than savings accounts or ISAs, even though they get taxed. However, you won’t be able to withdraw until the bond expires, so it’s best only to consider them if you can say goodbye to your money for the full term. You may get the best return possible if you can!

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Arranging Your Personal Finances

So Britain is finally out of recession – just. Latest figures indicated that the economy grew by some 0.1% in the last quarter, and it looks like the worst of Britain’s financial hangover is over. However, even though the biggest challenges to businesses are over, many people’s personal finances are still in crisis. It will certainly take some time to mend the worst of Britain’s bank accounts, but if you’re in a financial hole and looking to get out then here are some tips to help you.

Dealing with Debt
If you’re facing financial difficulty, then it’s almost certain you’ll have outstanding debts of some kind. Collectively, the population of Britain is some £1.3 trillion in debt, so you won’t be alone. It’s important to review all outstanding debts and make the minimum repayments every month if you are to maintain a decent credit record. If you can’t meet them, then you should seek advice about a revised payment plan. A simple way to make your debts easier to deal with, providing you can get a new loan, is to consolidate.

Consolidation
Should you have multiple sources of outstanding debt, all at different rates, then consolidation will probably be a very good option. You can take out either a secured (against the value of your house) or unsecured loan, and use it to pay off all (or at least some) of your existing debts. Once these have gone, you will only have to make one payment per month – and this should be at a lower rate.

Lowering Your Outgoings
Consolidating and lowering debt is one thing, but what about cutting down on your spending habits? Removing luxuries from your life is a fairly simple way to cut back, and the more you can remove, the more you will save. But you should also consider other ways – how do you travel to work? If you drive less than three miles, then it might be worth cycling. Food is another thing you can start making some serious savings on; if you always prepare your own lunch instead of buying prepacked sandwiches or a takeaway, you could be in line to save as much as £400 a year!

Saving
If you still have outstanding debt on credit cards and loans, then cash saving isn’t something you should consider, as the interest on debt repayments will almost certainly be higher than the interest you can gain in a savings account. However, if you manage to shake off your debts sooner rather than later, then you’ll need to think about the best ways of saving. If you managed to put away just £50 a month, you’d still have £600 by the end of the year, which could go towards something like a holiday. It’s worth hunting down a savings account with a good interest rate – you could do worse than starting your search with Alliance and Leicester who offer a broad range of savings products and tend to be pretty competitive.

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