Here’s our seven-step savings checklist to making the best of your hard-earned cash.
Step 1: Face the music
Dig out all your savings account paperwork and check interest rates and balances across all of them. Don’t be surprised if returns are dismal – the Financial Conduct Authority’s Cash Savings Market Study which was published earlier this year, found that, in some cases, interest rates on savings accounts have been LESS than 0.5%.
However, we’re confident that many of you will already know your savings rates, if the results of this recent poll are anything to go by:
Step 2: See how your rates stack up against the competition
Once you’ve found out how much interest you’re earning, get on the savings channel of a comparison website like MoneySuperMarket and see how rates on your accounts stack up against the competition. Make sure you click on ‘see all accounts’ to get a true market picture. If the rates offered by your savings accounts aren’t up there with the best buys, it’s time to take action.
Step 3: Don’t be afraid to change!
Transfer any savings sitting in inefficient low-interest accounts to more competitive accounts. If you’re transferring money held in tax-free cash individual savings accounts (ISAs), DON’T close your account to transfer the money over. If you do this you’ll lose the tax-free benefits. Instead, request a transfer form from your new provider and they’ll sort out the switch on your behalf.
You can find the best ISAs which accept transfer in here. Remember to click on ‘see all cash ISA accounts’.
Step 4: Factor in your current account
Don’t forget to review your current account at the same time you’re checking your other savings. These days, plenty of current accounts now offer higher rate of interest than easy access savings accounts, so if yours doesn’t, think about switching.
For example, TSB’s current account pays 5% on the first £2,000 you hold in the account so long as you pay in £500 a month. And some current accounts also offer access to high regular savings rates. First Direct pays an annual equivalent rate (AER) of 6% a year on its Regular Saver account, which you can only open if you also have a current account.
You can compare all the best interest-paying current accounts here. Bear in mind that you will need to use these accounts as your main current account which means paying in a minimum amount each month, setting up some direct debits and maybe even closing down your original current account.
Aged 65 and over? You have until Friday May 15 to bag yourself a Pensioner Bond from NS&I. These pay market-leading rates of interest over fixed terms of over one or three years. Find out more with our Q&A.
Step 5: Boost your balance
Increasing any standing orders into your savings account by just a few pounds a month will help you build your savings pot much more quickly. Some accounts pay tiered rates of interest depending on your balance; the more your save the more interest you might earn. One way to boost your savings balances is by reviewing your outgoings and cutting costs. Switching energy tariff for example could save you around £300 a year which you could put into your savings accounts.
Step 6: Don't dip in!
Try to keep withdrawals to a minimum. If you want to put your own safety net in place you might want to transfer some cash into a fixed rate bond which won’t permit withdrawals – or will penalise you heavily for doing so.
If you aged 65 and over, you have until Friday May 15 to get your hands on a Pensioner Bond which pay market leading rates of interest over one or three years.
The rest of us will have to sift out the best bonds on the market. Over one year, the best accounts include FirstSave’s fixed rate savings bond which pays 1.90% AER on a minimum investment of £1,000. If you want to lock in for longer, Secure Trust pays 3.01% AER, again on a minimum investment of £1,000.
Step 7: Spread your savings
Don’t keep all your eggs in the one savings basket. If all your money is piled into one account, transfer some of it into alternative accounts. If you’ve got substantial savings, this will ensure you’re protected by the Financial Services Compensation Scheme (FSCS) if anything goes wrong. Under the scheme, the first £85,000 of your savings, or £170,000 if your money is held in a joint account, is protected in the event that the bank or building society it is held with goes bust.
Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.