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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