How to get your savings working for you

money

Hello Dear Reader,

One of the things I’ve always tried to be diligent about is saving money. I certainly wouldn’t call myself an economist, and I don’t exactly follow developments in the economy religiously. But I’ve always believed that having a rainy day fund, and really just ingraining good habits in this regard, is a good way to go about things.

Yet while saving can at times require sacrifice, and a bit of hard work, perhaps an even bigger challenge has been to find ways to actually earn decent interest on this money. After all, if you work to save money, that money should also work for you. But returns for savers have been plummeting over the years, and the most recent cut by the Bank of England will only make things tougher.

Savings accounts dwindling

One type of account we’ve used is the Santander 123 account, which, until recently, offered headline returns of 3 per cent on a balance of up to £20,000. As guaranteed returns go, that was pretty good in the current climate. But even this was cut in half this month! It’s still one of the best out there, although another option which could give you a boost is the Nationwide FlexDirect account, which offers 5 per cent on the first £2,500 you deposit (1 per cent thereafter). Tesco Bank also offer 3 per cent on the first £3,000 you deposit, but generally speaking, it’s slim pickings out there.

New Savings bond

At this week’s Autumn Statement, it was announced that a new savings bond will be made available next spring. The rate of return on this will be 2.2 per cent, which is pretty competitive given that this is Government backed. The limitations for this bond are that you can only invest between £100 and £3,000, and your funds will be committed for a 3-year term. However, if you do invest the full amount, that will see you pocket around £66 a year, which isn’t too bad.

Peer-to-peer lending

Another alternative for finding competitive returns is through a fairly new method known as peer-to-peer lending. This involves investing your money through one of the UK’s major platforms, who then match your money with those in need of a personal loan. So you are effectively lending directly to peers, hence the name. There is risk involved, and you are not covered by the Financial Services Compensation Scheme if the borrower fails to pay you back; unlike with a savings or current account. However, platforms tend to mitigate this with measures of their own such as a segregated fund to cover any losses, and even an insurance to protect against default.

Lifetime ISA

Another way of stealing a march in terms of long-term savings will be the new Lifetime ISA, which goes live in April 2017. The biggest drawcard here is that you can deposit up to £4,000 a year, and receive a 25 per cent top-up from Government. That means you can effectively get £1,000 a year absolutely free – plus any interest accrued – which is hard to argue with. The catch is that the money is locked away until you turn 60, and you can only contribute up until the age of 50. Still, depending on your age, you could potentially gain anything up to £32,000 in bonuses for what is essentially a retirement plan.

The Junior ISA

For your children, a Junior ISA is a great way to earn tax-free returns. If your children were born between September 2002 and January 2011, this type of account would have taken on the form of the ‘Child Trust Fund’, but this can be converted into a Junior ISA fairly easily. It’s worth being a bit selective though, because children are taxed the same way as adults (ie: they also have a personal allowance), so the issue of interest being tax-free can be rendered null and void. As such, it may be more beneficial to put their money into a savings account with the best rate. What’s important though is to really try and get your kids involved, and with a good idea of the importance of saving, and doing so shrewdly. Because if you’re all working together on this as a family, you’ll be putting the bricks in place to build a solid financial future for your household.

Until tomorrow,

Love Froogs

 

 

Sponsored post – As always, if I didn’t agree with it, I wouldn’t post it.

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8 thoughts on “How to get your savings working for you

    • I’m going to disagree (in a nice way! No offence meant.) I think even JAMs can save, but just not much. Even if all someone did was put £2 a month away from Jan to Dec, that’d mean £24 for a couple of bags of groceries from Lidl/Aldi toward Christmas meals. Okay, it’s a tiddly amount saved, but it shows that even saving small amounts regularly can help at particularly stretched times of year.
      ………………………….
      The NS&I bonds sound a good option. Another way to save is to buy Premium Bonds. Okay, you don’t gain any interest, but at least your money’s secure and with ISA rates so low it’s worth a punt. I won £75 this year on my very modest amount of bonds. Much more than I’d have got by leaving the money in the bank.

      Liked by 1 person

  1. I’m a fan of premium bonds too, I don’t bother with other savings schemes now, just pump everything into the bonds. For the last two years I’ve had returns equalling 4% on the capital invested, so far I’m running at about 3.6%, both of which are higher than I’d get in any instant access account on the high street or online.

    Like

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