Do you want to get more from your savings? Chances are, the answer is a big fat "yes". Many people have seen their hard-earned cash languish in poor-paying accounts for the last few years as savings rates have hit record lows, so just what can you do? Well, there are a few ways you can get more from your savings to boost your returns and your balance, and we've outlined a few of them below.
You can save up to £15,000 in an ISA in the 2014/15 tax year, and the interest you receive will be entirely tax-free. That's why cash ISAs should be the first port of call for any saver looking to maximise their returns – the rates may be broadly similar to those available with traditional accounts, but because you won't have to pay any tax, you'll end up better off.
Let's take a look at just how much better off you could be. If you had a savings pot of £10,000, for example, you could put it in the top-paying cash ISA to achieve a rate of 1.81% and an interest payment of £181 over the year. However, if you're a basic rate taxpayer and put that same £10,000 in a traditional account, you'd lose 20% of your interest – or £36.20, based on the same interest rate. Doesn't it make sense to opt for an ISA first?
Another way to maximise your returns is to lock your cash away in a fixed rate bond, as these accounts invariably offer better rates of interest than their easy access counterparts. Sacrificing access for a set term may seem like a big commitment, but you could get a better return at the end of it – making it ideal if you're saving up for something specific – and the longer you're willing to tie your money up, the better the rate you'll get.
Some variable savings accounts come with an introductory bonus element that typically expires after around 12 months, and when it does, your rate could drop considerably. That's why you should review your rate on an annual basis to make sure it's still competitive, or alternatively, look for an account that doesn't come with a short-term bonus to begin with.
However, whether or not your account comes with a bonus, you'll still need to make sure you're getting a great deal. Reviewing your account on a regular basis will be a must, particularly if you've got a variable rate, and if there are better options then don't be afraid to switch (the only caveat is if you've got a fixed rate bond that penalises you for withdrawing the cash early, so make sure to weigh up the options).
If you really want to maximise your returns, it may be time to think outside the box. A traditional savings account isn't the only option if you want to save your hard-earned cash, and nor is it necessarily the best – what about high interest current accounts?
These can be a fantastic alternative to traditional savings vehicles, as many pay far more than any savings account on the market – in some cases as much as 5%. Most will come with certain restrictions (such as a monthly funding requirement) and many only pay the headline rate of interest up to a certain balance, but considering the returns on offer, this type of account could be a great home for at least a portion of your savings.
If you're not comfortable taking risks with your cash, you can stop reading. But, if you've got a slightly higher risk appetite and are willing to sacrifice a bit of security for the potential of better returns, it could be time to take things up a notch. Stocks & shares ISAs, for example, have the same tax benefits as their cash-based counterparts but can potentially offer much higher returns, but this is dependent on the performance of the stock market.
That's where the risk comes in, as if your chosen stocks don't perform well, your investment could be lost. It's a definite trade-off, but if you're willing to take that risk – and it should only be considered by those that can afford to lose their investment – it could be a possibility.
Comparing the options is one of the best ways to get more from your savings, as it simply means you can be confident you've got the best rate. Whether you're after the simplicity of an easy access account or want the higher returns of a fixed rate bond, your success lies in finding the right account – and that's where our best buys come in. Rates may not be setting the world on fire but you still want the best of the bunch, so check out the best savings accounts in the market and see if you can get more from your savings.
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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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