In a world largely driven by money, it’s important to think about putting some aside for a rainy day. We all know it, we’re told it all the time, but it’s not always as easy as it sounds.
Making a start is the hardest step, but, once you start seeing your money accumulate over time, you’ll never look back.
So, let’s start with the most important part:
Even the word used to terrify me.
I’m alright, thanks, I’ll hang out over here with my grammar and spelling.
Despite this aversion to the number game, from a young age I’ve always been a saver.
I’ll thank my parents for that one, teaching me the value of money from as far back as I can remember.
It’s often joked about how, as a child, I wouldn’t even spend my birthday money; I would just play with my sister’s things when she’d get bored of them.
I wouldn’t say I’m ‘tight’ with money, I’ve just taught myself how to ‘spend a little’ and ‘save a little’.
This last year or so has introduced the
terrifying wonderful world of banking into my life, and, as I’ve nervously embraced it, arms length to a full blown bear hug, I’ve learned a few hints and tips to share with those also feeling a little overwhelmed by the whole ‘saving’ thing.
This post is aimed at making the mind boggling world of saving a little simpler for everyone.
The higher, the better. Interest rates vary from account to account, so make sure you pick an account that’s offering to give you something worth banking with them.
To offer an example, if you were to save in an account offering 1% interest, you would receive £10 for every £1000 saved. Interest can be paid monthly or annually, depending on the type of account.
Banks want you to bank with them, not their competitors, so make sure you shop around for the best account on offer for you.
Find out what accounts are out there, what would best suit your situation, and who’s offering the best deals.
Whether it’s a standard current account, a Cash ISA or a savings account, there’s something out there to suit your needs.
Information can be found online, over the phone, or by calling into your local branch.
Current accounts can be more than just the account your wage goes into every month. It’s worth considering other accounts if you aren’t getting the most out of the one you’re currently with. Some banks will pay you to switch, others have interest rates that can rival savings accounts, and some even have incentives such as cash back on contactless payments.
If you can’t afford to start putting money away straightaway, it’s worth looking at your current account and seeing if you can be getting a better deal elsewhere.
A cash ISA is, simply put, a savings account that does not charge tax. Individuals over 16 can put up to £20,000 into a Cash ISA each tax year.
Cash ISAs can either be easy-access, where money is free to be paid in and taken out at the customer’s desire, or fixed-rate, where banks often offer higher interest rates to lock cash in for a period of time.
If saving a considerable amount of money, Cash ISAs are a great choice.
Help to Buy ISAs
If, like me, you’re planning on buying your own property in the near future, Help to Buy ISAs are an absolute must.
So long as you’re 16 plus, you can receive £50 from the government for every £200 you save, up to £3000.
These accounts can be opened with as little as £1, up to £1200. Following this, you can pay in up to £200 each month. When you’re ready to purchase your first property, the government will provide 25% on top of your savings towards the deposit.
The total amount you can receive this bonus on is £12,000, meaning your bonus will equate to £3000. That’s £3000 towards your first home absolutely free!
It’s worth noting, though, that you must have at least £1600 in the account to claim the 25% bonus, and the bonus will not be paid on any savings exceeding £12,000. Once £12,000 is saved, the account can still be used as a Cash ISA, but further savings will not receive the 25% bonus. You can save in your Help to Buy ISA until the 30th of November 2029 and must claim your bonus by the 1st of December 2030 to reap the rewards of this savings account.
Help to Buy ISAs are available until 30th of November 2019, so it’s advisable to open your account sooner rather than later.
If you’re saving solely to purchase your first property, this account is perfect for you.
Free money towards your first home is definitely incentive to get on the property ladder.
Lifetime ISAs were launched in April 2017, so are a relatively new savings tool. Different to Help to Buy ISAs, these can be used both to help buy your first home, and for retirement. Similarly to the Help to Buy ISA, you get 25% on top of any savings made, but are given a £4000 annual savings cap, rather than the Help to Buy ISA’s restriction of £200 a month. These savings accounts are available for customers aged 18 to 39 and the account must be open for one year before the bonus can be used to purchase a property.
When saving in a Lifetime ISA, customers have the option to pay in the full £4000 each year as a lump sum, or by putting in as much cash as they can, when they can. If you were to save the full £4000 in a year, this would mean an annual addition of £1000 from the state. The bonus can be received on all money saved, up to the age of 50.
If using the Lifetime ISA for retirement, the money saved cannot be accessed until you’re 60 years of age, and then is available to take as and when.
It is worth bearing in mind that a charge of 25% is incurred when money is taken from a Lifetime ISA for anything other than the purchase of your first property, or to access the retirement savings, so this type of account is not ideal unless you are sure you want to use it for those reasons.
If you’re saving for retirement or the purchase of your first property, and you’re wanting to put larger sums of money away, this type of account could be right for you.
If you’re just planning on putting a little money aside for that ‘rainy day’ situation, a regular savings account may better suit your needs. These accounts were less popular than Cash ISAs since customers had to pay tax on the interest earned when using regular savings accounts, but this changed in 2016 when the Personal Savings Allowance was introduced. Now basic rate tax payers can earn up to £1,000 in interest without paying tax, and higher rate tax payers can earn up to £500 without paying tax. Regular savings accounts, similarly to Cash ISAs, can be easy-access or fixed-rate.
For saving smaller amounts of money, these accounts are ideal.
Ask for help
Remember, help and advice is out there.
Pick up the phone or call into your local branch and ask for an appointment to discuss which saving style will suit you best.
As mentioned earlier, banks want you to bank with them, so they will be more than happy to help.
Speaking one on one to someone about what the best next step is for you can really help put your mind at ease.