If like me, saving feels really dry (and let’s face it a bit dull) think of it as a piece of cake or two… sorry couldn’t resist especially when I saw these bad boys… OK back to saving it…
1. Lifetime ISAs/Help to Buy ISAs
This first stage of the Savings Fountain – Lifetime ISAs and Help to Buy ISAs – are only for first-time buyers; if you’re not a first-time buyer then head down to Point 2.
The Lifetime ISA (LISA) was launched in April 2017. Anyone aged 18 to 39 can open one and save up to £4,000/tax year into it, as a lump sum or by putting cash in when they can. Then the state adds a 25% bonus on top. So save £1,000 and you’ll have £1,250 and save the full £4,000 and you’ll have £5,000 which even for me sounds pretty cool.
First-time buyers can use the money and bonus towards the deposits for any residential property costing up to £450,000 once they’ve held the LISA for 12 months (it can also be used for later-life saving – but be careful, as for most, saving in a pension is likely to be more lucrative).
Anyone 16+ who’s never owned a home – and may want to – can open one. It works in a similar way to a LISA, with the state adding a 25% bonus on top of your savings.
However, you can’t save as much in a Help to Buy ISA as you can in a LISA and the max bonus is £3,000, far less than the LISA’s £32,000 max.
Plus, you can have a LISA and a Help to Buy ISA – you just can’t get the bonus on both.
2. Bank accounts
Bizarrely, some bank accounts’ in-credit rates currently smash easy-access savings accounts and ISAs – especially now all interest is paid to you tax-free. How nuts is that! But It’s a loss leader to build banking customers yet if you’re prepared to switch account, rates are strong (it’s not nearly as much hassle as it once was). Don’t just focus on rate, instead aim to cover as much as possible at decent rates.
If you’re not eligible for a Help to Buy or Lifetime ISA, max the best bank accounts before you move onto any of the other options. If you’re eligible for the Help to Buy or Lifetime ISA, fill that first, then move onto bank accounts before the other options below.
3. Regular savings
Once you’ve filled your current account(s), start to trickle your money into regular savings. A regular savings account can pay high interest but it’s only on a small amount of money – if like me you are unlikely to remember, pop it on a direct debit and then it’s done!
While these accounts can pay slightly more than bank accounts, as you need to put cash in each month, you’d want to drip-feed it across from your bank account/top savings account anyway – hence why it’s not top of the list!
4. Fixed-rate cash ISAs
Once you’ve maxed your regular savings account, move any money you don’t need access to into an ISA, guess that new car will have to wait…
A cash ISA is just a savings account where the interest isn’t taxed (so you keep all of it). Anyone over the age of 16 in the UK can put up to £20,000 in an ISA each tax year (April 6 – April 5) and once in, it stays tax-free year after year – Happy days!
Better still, with fixed-rate cash ISAs, unlike normal savings, you can get access to the cash within the term – though you’ll lose some interest in penalties. Yet even if you withdraw early, these can still be winners.
5. Easy-access cash ISAs
If you know you’ll need access to your cash then you’ll need to go for an easy-access ISA. Here – there are no withdrawal restrictions, you can get your cash when you want it, for the ladies reading this, it means you can have those retail therapy moments without the guilt…
Don’t forget if you’ve got old ISAs built up over the years you can transfer them into a better paying ISA. But NEVER just withdraw the cash and pay it in.
6. Fixed-rate savings
If you’ve still got money left (unlikely in my case) next consider whether you’re prepared to lock it away without access – if so, you can fix with a locked in rate that’s usually higher.
Do bear in mind if rates rise over the term you can’t switch, so think carefully before fixing for longer than a couple of years. . Although with todays news, interest rates may be on the rise, which is good news for savers
7. Easy-access savings
With whatever you’ve got left, anything you need access to stick it in an easy-access savings account. Rates are lowest compared to everything else in the fountain, but you can deposit and withdraw cash at your leisure.
All the easy-access savings deals have a variable rate, so you need to monitor them to ensure the rate doesn’t drop (switch away if it does).
As our team continues to grow we will be able to offer you help with more complex ways to save in a really tax efficient way, so stay posted… and thanks for reading!
We’d love to talk about ways we can help you so if you like what we say get in touch today at firstname.lastname@example.org