With the bank base rate approaching zero and most bank and building society savings accounts offering hardly any interest, many people question whether it is worth saving at all. But it is always worth building up some emergency savings, and with a little care and research it is still possible to find reasonably good interest rates. Here are some hints and tips.
Regular Savings Accounts
Many of the best interest rates are on savings accounts which require the saver to put in a certain amount of money each month, usually by direct debit, for a fixed amount of time such as one year. Some of these are currently offering 3 or 4% or even higher, while ordinary savings accounts at the same institution may be offering far less. It is definitely worth having at least one of these. Usually the maximum amount customers can save per month is quite small – around £500…but the interest on this will add up. For savers who cannot afford to put aside this amount every month, it may be worth gradually transferring money from another savings account to a current account to use for this purpose.
Fixed Rate Savings Accounts
These offer a favourable rate of interest, but may require the saver to tie up the money for a fixed period of time, usually at least a year. Sometimes a limited number of withdrawals are allowed during that time. These savings accounts appear to be a good idea at the moment. However, savers should beware of tying up all their money. It is better to keep some in an emergency fund which can be plundered should it be needed. Also, should the economic situation improve, the rates on these savings accounts may not be as good as they look at the moment. So it is worth putting some money into an account like this, but not too much.
At present savers can put £3,600 into a cash ISA (Individual Savings Account) every year. These often have very favourable rates of interest, with the added advantage that it is tax-free! Savers can also withdraw their money at any time if they need to, but if they have reached the limit, they cannot re-invest what they have withdrawn until the next tax year. These accounts are a good deal, and every saver should have one if at all possible.
Internet Savings Accounts
Some of the savings accounts which can only be accessed on-line offer preferential rates of interest in comparison to ordinary savings accounts one can open at a bank or building society branch. Savers who are confident with on-line accounts should definitely consider these.
In summary, it is worth doing some research, both on the internet and through sources such as the financial pages of the national newspapers, in order to find the best places to put money during the recession. Savers may be fairly pleasantly surprised at what they find.