Making Those Savings Decisions

by News Guy on August 8, 2012

(Guest Post)

Setting aside money each month should be the most difficult part of saving. Unfortunately, it isn’t always the case due to the confusion of understanding which savings account is best suited to your needs.

To make sure you avoid this confusion and really make your money work for you it’s important to look at your individual savings situation critically and analyse it according to strategic factors such as how you want to manage your money and whether you need access to your funds easily.

Here we take a look at your options for savings accounts online.

Cash ISAs

A Cash ISA or Individual Savings Account has been termed the “cornerstone of your savings future” as it enables you to save tax free. If you’re looking for a savings account, a cash ISA should always be your first port of call, as you don’t pay tax on the interest you earn. The best way to think about an ISA is as a tax free savings wrapper, where your savings are held away from the tax man for the time they are in the account. For the current financial year you can deposit a total of £5,640 into a Cash ISA.

If you can afford to deposit the total amount (or any amount below the limit) into an ISA, it’s a worthwhile step as you can save tax free. To get the real benefit you need to keep your funds within the wrapper, however if you need continual access to your savings, there are also ‘instant access’ Cash ISA options to consider.  It is important to note that if you have saved your full allowance in one tax year, any money that you withdraw from your Cash ISA cannot be replaced until the new tax year begins

Easy access savings

This is the most common form of savings vehicle, with the real benefit being in terms of flexibility as you can dip in and out of your savings whenever you need to. You may not secure the  best savings interest rates (as these often occur with fixed rate savings accounts), but you will have guaranteed flexibility. This is the ideal option for those who already have a Cash ISA but still need the reassurance of easy access to their savings

Limited access

These are ideal if you know exactly when you’re going to need your savings. You’ll benefit from a higher rate of interest as you won’t be dipping in and out. Choosing this option will make your savings work harder when you don’t need them, ensuring you have more when you do.

Fixed term

If you can afford to lock your savings away for a defined period of time, you can benefit from a higher rate of interest allowing your money to mature for a longer duration in fixed rate bonds. You won’t be able to access them for the period; but you’ll be sure they’re working for you and assisting with your financial future.

Choosing the best option for you should be the easy part; it’s time to make sure it is.

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