The importance of getting into the savings habit should never be underestimated. Not only will putting money aside on a regular basis mean you're able to build a valuable nest egg for the future, but you'll want an emergency fund too – ideally around 3 months' worth of income saved for life's little emergencies. It should be a core part of money management, but to really make the most of it, it's all about saving smart.
Setting up an ISA should be high on the list of priorities, but unfortunately just 38% of respondents to a Standard Life survey are actively planning to invest in a cash ISA this tax year. The figure is even smaller when it comes to stocks and shares ISAs, with a mere 9% planning to invest.
There's clear room for improvement, and considering that ISAs pay interest entirely tax-free, there's no reason not to consider putting at least some of your hard-earned cash into this kind of account. It could be even more fruitful when the ISA allowance rises to £15,000 in July – it's one of the best ways to save truly smart, and you don't even need to stick to cash.
Opting for a stocks and shares ISA could be a great alternative for those with a longer-term savings view and a bigger appetite for risk, as this type of account gives the potential for even better returns while again offering those returns completely free from tax.
However, it's important to bear in mind that the best rates for cash ISAs will usually be offered to those that make a lump sum fixed investment, and similarly you'll need to lock your money away for a few years to really benefit from stocks and shares versions too.
That means you might want to consider the likes of regular savings accounts or even high-interest current accounts if you want to save little and often, and an easy access account will be ideal for an emergency fund.
Regular savings accounts will often provide highly competitive rates of interest, such as the 12 Month Regular Saver from Saffron Building Society which offers 4%, and high interest current accounts can offer even more. Take the TSB Classic Plus account, for example – offering 5% on in-credit balances up to £2,000, it could be a great home for your money.
Often a combination of different options will be the best way to save smart, ensuring you can get the best of all worlds – tax-free interest, easy access to your cash and great rates. Make sure to compare the options so you can build up your savings pot with ease.
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