Could your savings be costing you money?

Could your savings be costing you money?

It’s always a good idea to set money aside in a savings account (around 2-3 months’ salary is a sensible amount), but with such low interest rates, it’s possible you might be losing out on money just by keeping it in the wrong account. And if you’ve got a large stash sitting there, you could potentially be missing out on hundreds of extra pounds in your pocket.

Think about changing your account

As with most financial products, it’s always worth shopping around. There’s a huge choice of savings accounts available you could switch to. The process is usually fairly simple and quick to do.  Just make sure you’re not penalised for withdrawing funds by your current provider.

Move some to an ISA

Putting some (or all) of your savings pot into an ISA can be an effective way to earn more interest and save tax. What’s great about ISAs is that you can save up to £20,000 in them tax free, and you can withdraw funds easily in most cases.

You can have more than one at a time, and they can be cash only, stocks and shares, or a mix of the two. But no matter how many you have, you can’t exceed the £20,000 in total or you’ll be charged at your normal rate.

Invest for the long-term…

Of course, you can keep money in a savings account for as long as want and it’ll continue to grow. However, there are specific investments designed to give you higher returns over the long-term. The pay off to this is that you won’t be able to get your hands on your cash while it’s invested, but the growth you’ll receive will usually make up for that.

… and spread your risk

Someone once coined the phrase: ‘Don’t put your eggs in one basket’.  The same goes for your money. Having different types of savings and investments can help you spread your risk, get a steady level of growth and have funds you can get access to quickly in case of emergencies and so on.  This last point’s really important, so you can deal with unexpected bills and expenses as and when they crop up.

It’s worth investing, even in sticky times

Some of you reading this might be thinking the current financial climate makes it a difficult time to start investing. It’s true the stock market is unpredictable, and stocks and share have fallen recently, but they always recover and usually rise to a higher amount than they were previously. Cash never grows at anywhere near the same rate. In fact, it often loses its value over time.

Read our ‘Tips for investing in a volatile market’ blog for more info

Always get financial advice

The best way to make sure you invest properly and are making the most of your money is to get advice before you start. A financial adviser can help you understand what products would be best for your circumstances, and how your tax situation might be affected.

The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.