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It pays to be a promiscuous saver
Nowadays, when it comes to our savings, it pays to put oneself about a bit, metaphorically speaking, in order to get the best return on cash.
Most banks will offer attractive interest rates for an initial period, but these tend to plummet after a year or so as they focus their attention on attracting new customers. So clearly loyalty does not pay and switched-on savers will keep moving accounts to make sure they are benefitting from the keenest rates. This is even more pertinent in our current low interest, high inflation environment. So let’s examine some ways you can work the market in order to get the best possible return.
- Individual Savings Account (ISA): the money earned here is tax-free and this year (2011 – 2012) you can save up to £5,340. Once your ISA allowance is used up, you should you start looking at ordinary savings accounts.
- Easy Access Accounts: these are ideal for building up a fund of money. Most of them offer bonus rates which can make up the bulk of the interest paid. This means that once the offer expires, the interest you receive will be far from competitive, so make sure you check when the bonus deal expires (typically in 12 or 18 months).
- Current Accounts: some current account providers offer their customers preferential rates in order to discourage them from moving. For example, First Direct and HSBC give paid-for current account holders a regular savings account that pays 8%.
- One Year Fixed-Rate Bonds: these work best for savers with a lump sum to deposit and who take the longer view. Interest rates may be favourable but they can be detrimentally affected by early withdrawals.
It pays to read the small print. Find an account that suits your saving style and your circumstances, so that you can withdraw money when you need it without incurring penalties. Be aware that internet-only accounts tend to be the most competitive, and be prepared to sacrifice some interest if you want the branch access.
For concise, impartial analysis and advice about of your personal finances, call the Census Financial team on 028 9066 8700.