- Find a higher paying savings account
- Best accounts for long term savings
Are you the world's worst saver? Or perhaps you're struggling to make the most of your money in the current low interest rate environment? Our 10 tips for savers should help:
1. Save regularly
Get into the habit of saving money every month. Even if you can only afford £10 or £20 a month, it's better than nothing - every little helps and it will mount up over time.
2. Go for an account that suits your needs
Don't just open any old savings account - go for one that suits your objectives. Factors which will influence your decision include whether or not you'll need to dip in and out of your savings; how long you want to save for and whether you'll be investing a lump sum or are just looking to save on a regular or ad hoc basis.
3. Keep an eye on your rate
Savings providers often launch attractive new deals offering a great headline rate designed to pull in new customers. Over time the competitiveness of many savings accounts is eroded because providers know the majority of customers will not bother moving their money elsewhere.
You should therefore regularly check what rate your savings account is paying and to see how it compares with other deals in the market.
This is particularly important if there has been a change in the Bank of England base rate: such moves provide banks and building societies with the perfect opportuntity to manipulate their margins at the expense of existing savers.
They can do this by reducing savings rates by more than the Bank rate cut (if the Bank of England reduces rates) or not passing on the full rise (if the Bank has increased rates).
4. Don't forget the bonus
Introductory bonuses are increasingly common. This is where you are paid a preferential rate of interest for an initial period - often 12 months - after which the rate drops back.
The size of these bonuses has been increasing with many now more than 1.5 percentage points. This means that the rate will plummet once the introductory period ends, so be prepared to move your money again at that point.
5. Watch for restrictions
Just because an account is described as being 'easy access' it doesn't mean you won't be penalised for accessing your money.
Some easy access accounts have withdrawal restrictions - you can make a withdrawal at any time without giving notice, but it might cost you to do so. Therefore check the small print.
Common tactics include only permitting a limited number of penalty withdrawals a year and not paying interest in the month a withdrawal is made.
6. Use your ISA allowance
You can invest up to £3,600 a year in a cash ISA and interest is paid tax-free. This is a valuable tax break so make sure you use it.
For more information read our article 'How to choose a cash ISA' and watch our video 'Cash ISAs explained'.
7. Save in your spouse's name
Interest on savings is taxed (unless the money is invested in an ISA) so if your husband or wife is in a lower tax band consider moving your savings into his or her name.
8. Don't put your money under the mattress
With interest rates at an all-time low and many people's trust in financial institutions shattered, it may be tempting just to stash your cash under the mattress - don't.
Not only will you earn nothing on your money if it is just kept at home, but you're also taking a big risk. What if you were burgled? Contents insurance will cover some cash but most insurers cap the amount.
The leading savings accounts are paying significantly more than the 0.5% base rate, and as long as you don't have more than £50,000 invested with a single institution your money is totally safe.
9. Spread your savings
If you have more than £50,000 in cash savings, don't have it all invested with the same bank or building society. Under the terms of the Financial Services Compensation Scheme only the first £50,000 (£100,000 in a joint account) is fully guaranteed in the event of the institution going bust. So spread your money around to ensure none is at risk.
10. Don't forget your borrowings
If you are being charged a higher rate of interest on your debts than you are earning on your savings, you may be better off repaying those before building up your savings.
