Make your savings account work for you
Do you have a gift for thrift?
Like letter writing and managing England to the quarter finals of major football tournaments, saving has become something of a lost art.
Lots of us, thanks to the recession and a record run of low interest rates, have either not had the cash or the incentive to save. We borrowed when money was cheap or we pulled in our wings and put all our efforts into not panicking.
Things, finally, are changing. As Mark Carney, the Governor of the Bank of England says, the economy is on the up and interest rates are going to rise - probably later this year or early in 2015.
It's an even better time with rates predicted to be on the increase - providing you remember how to make it pay.
Financial expert Jon Cartlidge, The Nottingham’s Senior Product Manager for Savings and Mortgages, has a few pointers.
Jon wants to begin by asking you three things:
What are you saving for - is it for a rainy day, a holiday, a new car, the deposit on a house, putting money aside for your children’s university years or trying to build up a pot of cash for your retirement? Perhaps you’re saving for two or three of those things?
How much money do you have to save now?
How much money do you have spare to save at the end of every month?
Answering those three questions will help you to identify the best places to put your money, says Jon.
All too often savers don’t do that. They go on to the internet, find the instant access account offering the highest rate and put all their money in it. They think they’ve got a good deal. It might be a good deal, says Jon, but it might not be the best deal for them.
If the person is saving over the long term and they’re not planning on touching that money for a few years, they could get a tax-free ISA* or a fixed-rate savings account that requires them to “lock” their money away for a set period of time. If the person is saving in the medium term, for a car or Christmas, then other accounts with shorter withdrawal notice periods - perhaps 30, 60 or 90 days - might be appropriate.
A savvy saver “waterfalls” their money, says Jon. They put a lump sum in an ISA and anything that spills out goes elsewhere. If they have £100 spare from their salary every month, for example, a regular savings account requiring set deposits might be just the thing.
The key is to work out what you have, when you might need some of it (if your boiler breaks down or the roof springs a leak, etc) and plan accordingly.
Talking to someone might be useful. The Nottingham has lots of trained people who can give your finances a full MOT and suggest the best places to put your money. Whatever you decide, do it sooner rather than later.
“The one thing that has been predicted is that interest rate rises are coming and they are getting closer all the time,” says Jon. “You need to plan for them.”
*Interest will be paid free of UK income tax. The value of tax benefits depends on individual circumstances. The tax treatment of ISAs may change.