Top saving tips for 2010
Print View - Published: Wed, 31 Mar 2010 at 11:16 PM
0 comments
Savers had little to shout about for much of 2009, with the base rate stuck at a historic low of 0.5 per cent, and many people earning next to nothing on their cash.
The Bank of England's decision to keep rates on hold yet again this month - has done little to improve the outlook, and you may be questioning whether it's worth putting money away at all; in fact, worrying new findings show that many consumers are now choosing to save less - with a quarter of people not saving at all (*)
However, in the current uncertain climate, it's more important than ever to get into the savings habit to build up a safety net to cushion you through the financial turmoil; as a rule of thumb, you should try to have savings equivalent to three months' worth of salary slotted away.
If you want to make the most of your hard-earned cash, the key is to maximise income by ensuring you are getting the top rates available.
It's nicer with an Isa
As a saver, your starting point should be a tax-free individual savings account (Isa).
From 6 October last year, the limits increased to £5,100 for those aged over 50, but younger savers will have to wait until April 2010 until their current limit of £3,600 is raised in line with this.
Right now, Standard Life is paying 2.65 per cent on its no-notice Isa which permits transfers in from previous years' Isas.
Get into a fix
Fixed-rate bonds continue to be the most competitive area of the savings market, and while some of the best returns have dwindled over the past few months, there are still some good deals up for grabs.
FirstSave, for example, is paying 3.65 per cent on a one-year bond, while ICICI is paying 4.25 per cent on a two-year and 4.7 per cent on a three-year deal.
The best rates are still being offered on the longest fixes with the State Bank of India and Halifax paying a huge 5.25 per cent and 5.15 per cent respectively on their five-year bonds.
However, despite the high rates on offer, you do need to think carefully before committing to a long-term fixed-rate account, as if rates go up quickly, these offers could soon become uncompetitive.
Beware of the bonus
If you think you may need to get your hands on your money, you should look to slot it away in an easy access account, but note that in the current low-rate environment, many of these variable rate accounts are paying paltry rates - so it's worth boosting returns by opting for a deal that includes a one-off bonus.
Coventry building society, for example, has just launched an easy access account paying 3.3 per cent - including a 1.3 per cent bonus, while Cheshire building society is paying 3.25 per cent on its 30-day notice account - including a 1 per cent bonus; both accounts require a minimum deposit of £1,000 and both bonuses are for 12 months.
However, you do need to shop around for a new deal once the bonus falls away, or you could see your rate of interest slashed.
Elsewhere, for smaller deposits, Saffron building society is paying 2.85 per cent on its internet saver.
Get into the regular savings habit
Regular saver accounts are a good option if you want to be disciplined about building up a savings pot, but you must check the terms and conditions, as while they may appear to pay high rates, they often come with strings attached.
Rates tend to be fixed for only a year, during which you cannot access your funds without penalty, and you can usually only invest up to a certain amount each month - plus you may face penalties if you fail to invest on a regular basis.
Stroud & Swindon building society is currently paying 4.5 per cent on its regular saver into which you can pay a maximum of £250 per month, while Principality building society is paying the same rate, fixed for one year -with a slightly higher monthly limit of £500.
Act fast
If you do want to cash in on the high rates currently on offer, you need to act quickly, as many of the top-paying accounts are being snapped up very quickly - and are subsequently withdrawn.
You also need to keep a close eye on any new account you sign up to, to ensure you're still getting a good deal.
If, at any point, you're not happy with the rate, you must be prepared to switch.
(*) Nationwide Savings Index
All rates correct as of 12/01/10
About the Author
Find out more about savings tips for 2010 at http://www.confused.com/savings
Want More Free Credit and Financing Tips?
You'll get insights, interviews and helpful tips to repair and grow your credit and borrowing power all for free!.
The Credit and Financing eTips has a No Spam policy. Your information will never be shared or sold.
