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We all try to save money, whether it's for a holiday, a new car, something more long term or perhaps just putting some money away for emergencies or a rainy day.
The question is - are you sure that your savings are working hard enough for you? - This week we take a look at some of the ways you can get the most from your hard earned nest egg.
1. Branch based savings accounts and current accounts are often a poor deal
If you've got money sitting in a high street bank current account or a branch based instant access savings account, it's highly likely that you'll be receiving virtually nothing on your savings balance. Simply by switching to an internet-based savings account you can earn up to ten times more interest and still retain access to your cash when you want it.
Check out the highest paying accounts right here.
Fed up with switching accounts to get the best rate? - Check out the High 5 account from Investec - they keep an eye on the rates in the market so you don't have to - get the details here.
2. Keep the taxman away from your savings
Whilst over 16 million people already have an ISA (Individual Savings Account), there are still millions of others failing to take advantage of this tax free benefit from the government.
Don't be put off by thinking that an Isa is complex or that it is only for the very wealthy. An Isa is a tax proof 'wrapper' that allows you to invest up to £7,200 in Isa's - one cash and one shares - for the current tax year, with a maximum of £3,600 in cash and the rest in shares.
Cash Isa's are simply a tax free savings account that in many cases can be opened with as little as £1. Remember non Isa savings accounts will have 20% tax deducted. If you still need convincing, take a look at this - if you save £3,600 in an ISA paying 5% you will pocket £180 in interest for the year. However if you held the same sum at the same rate in an ordinary savings account, the taxman would help himself to £36.00 of your hard earned interest.
Everyone over the age of 16 is entitled to open an ISA. And it's never too early to start getting one over on the taxman.
Click here to check out the best deals on cash ISAs.
3. Watch out for the catches
With any type of savings account, don't accept high interest rates at face value, some of the banks and building societies employ some pretty sneaky tricks that are sometimes well hidden in their advertising and literature.
So beware of bonuses that may only be included in your interest rate for the first few months or the fact that you may receive no interest for an entire month if you make a withdrawal from your account. As a general rule of thumb, if the rate of interest looks really good, there are likely to be some strings attached, so be on your guard.
4. Be creative and save more from the taxman (and it's legal!)
When you've made full use of your annual ISA allowance, there are still other ways to save money. If your spouse is a non taxpayer or pays a lower rate than you, you can cut down on the amount of tax paid on your interest by transferring some of your savings into their name. Remember each individual aged 16 and over has an annual tax free savings allowance.
5. Don't forget, kids go tax-free
If you're putting some money into a savings account for your kids, make sure they don't have to pay any tax on it. By completing a form R85 (from HM Revenue and Customs) the interest on your child's account will be paid without any tax being deducted. For more details on the R85 click here.
6. Protect your savings from inflation too
In an economy where the prices of goods and services have been rising, inflation can have a negative impact on the future purchasing power of your savings. National Savings and Investments (a government backed savings body), offers a range of savings accounts that will protect your savings from inflation. The rates are currently 1% above the rate of inflation (measured by RPI) and all returns are tax free. Click here to find out more.
7. A tax free allowance that many people aren't aware of
As well as your annual ISA allowance, you can also save a further £25 per month tax free with a friendly society. Click here for further information.
So whatever type of savings account you're looking for whether it's a regular monthly saver, a fixed rate bond, an ISA or an instant access emergency fund, you can find the top rates with Moneynet right here.
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