Expert Advice submitted by
Saving isn't always easy especially in light of the historic low interest rates we have seen over the past two years.
With a myriad of accounts on offer without a savings strategy you can't be sure that you are saving effectively and efficiently and it could mean in some cases that you're not maximising your returns.
Here are a few handy tips to make sure you get the most from your savings:
1. Is saving the best option for you at the start?
This might seem like a little back to front after the initial introduction but saving might not always be the best option at the outset.
Do you have any debts? If so then it's probably worth focussing on clearing these first as it's highly likely you are paying a higher borrowing rate than the rate you would be offered to save.
It's also worth checking out the terms and conditions of any loans you have to see if you get penalised for overpaying or paying early but it still could be worthwhile.
If you really feel like you need some rainy day money tucked away for emergencies then at least try and pay extra or some of your debt off as early as you can.
2. Set yourself a goal
Getting into the right saving habit can take time and discipline. So the next thing you need to consider is what you're saving for? By setting yourself a saving goal this can help shape the tactics around the best way of achieving it.
You might be saving for a rainy day or just to have a buffer for an emergency, it might be a holiday or even a deposit for a new house, depending on what it is can make a big difference to what you do so lets look in more detail.
If you are starting out saving then a simple way of doing it is by using a regular saver account. With a regular saver account you can normally set up a standing order or direct debit that pays a fixed amount into the account usually each month when you have been paid.
Most regular saver accounts can be opened with as little as £50 so it's a great way of starting to save for little effort and the interest rates are normally higher than an account opened with a lump sum.
Regular saver accounts are a great way to save for things like holidays, home improvements or even a deposit for a house.
If your savings goal is longer term and you perhaps have a lump sum such as bonus or windfall and your not looking to spend it quickly then your best bet might be a fixed rate savings deposit.
Fixed rate saving accounts generally pay a higher rate of interest at a fixed rate but you won’t be able to access your money so it really is for the long term.
Longer term saving accounts such as fixed rates are great way to save for retirement your families security or simply building up a nest egg for the future.
If you do have a lump sum and you don’t want to commit to a long term fixed rate with all your cash then it might be worth splitting it across several accounts. Make some easily accessible for any unexpected reasons and put some in a notice account and the rest away for a few years in a fixed rate. That way you have all your bases covered.
Not only will you be maximising returns but also giving yourself financial freedom by still having access to the majority of your savings.
3. Keep up to date, don't just look at the interest rate – work out your earnings
If you have had savings for a while and have spread them across various banks and financial institutions you might have lost touch with what interest rates you’re being paid on your savings.
Many people have savings in old closed issue accounts, which often pay very poor rates of interest sometimes as little 0.10 percent. Make sure you keep on top of where and how much your savings are earning and look to switch (taking care about any penalties you could incur) to the most effective account to suit your needs.
It’s also useful to work out the specific amount your earning each year as sometimes just seeing an interest rate makes it difficult to see how you are progressing against your saving goal and seeing the amount interest earnt as cash can often motivate you to save even more.
4. Understand your account
Usually savings accounts that pay the highest interest rates have the most restrictions on when and how you can access your money or how much you might need to pay in each month.
As previously mentioned accounts that have a fixed rate offer little or no access. Other accounts such as notice accounts stipulate a set period in advance that you must give in order to withdraw funds or you can in the majority of cases withdraw funds early with some sort of charge or deduction of interest on the amount you are withdrawing.
It is always worth reading closely the account terms and conditions so that you don’t get caught out by any of them and incur unnecessary charges. But more importantly it ensures that you can maximise the return on your savings over time.
5. Keep an eye on things
It's important that you regularly check on your savings accounts and review how well each of them is performing.
If it's a variable rate account then always check to see what the Bank of England Base and how well your rate compares.
In addition keep an eye how much your account pays compared to other newer accounts as usually older accounts tend to pay less.
If you have a fixed rate account that is coming to an end the likelihood is that if you don't have an immediate replacement then your funds could end up sitting in account that pays a significantly lower rate of interest so be sure to look around in advance to find a suitable replacement that meets your needs.
In short start saving, look for the best returns and products to best suit your situation, do your homework and regularly keep an eye on things. That way you will get the most from your hard earnt savings!
For more information about Britannia International click here.
