Five ways to boost your bank balance

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The economic downturn has forced many consumers to become very crafty when it comes to cost cutting, but new research suggests that is not exactly the case when it comes to building up our savings accounts.

According to Standard Life Investments, while nine in ten consumers are actively trying to make their money go further, fewer than half are “saving smart” by making the most of tax-free accounts.

If you are worried that you have dropped the ball when it comes to squirreling away your savings, read on for five ways to bolster your bank balance.

1. Analyse your finances first

If you want to grow your financial nest egg, it makes sense to tackle debt first. Use any extra funds to repay costly credit cards or overdrafts as it defeats the purpose of saving if you are paying interest on debt.

Then, if you are struggling to save, try to figure out where you could make cutbacks. The key to this is a realistic budget. Carefully look through bank and credit card statements to see exactly where your money is spent. Many of us often overlook the little extras such that can send a more balanced budget into the red.

Once you have gotten your finances in tip top shape, it will be easier to siphon off money into your savings pot.

2. Make a date

The rising cost of living and stagnant wage inflation means that for many consumers there isn’t a lot of money left at the end of the month for saving.

The trick to growing your savings pot is to save regularly. Set up a standing order so you don’t notice the money leaving your account on payday. Also, whenever you get a pay increase, increase the amount your save.

Financial experts agree that you should aim to have at savings pot worth at least three months’ salary. But be realistic on how much you can put away each month, as you don’t want to leave yourself short. There is no point saving if you then have to rely on credit to make ends meet.

3. Make the most of tax breaks

A cash Isa allows you to put away £5,940 tax-free in cash each year – which increases after July to £15,000.

To maximise your allowance, Hinckly & Rugby’s 120-day Notice Cash Isa (Issue 2) provides the best return for those looking for a variable rate Isa. According to SavingsChampion.co.uk, this account pays 1.75% and can be opened with a deposit of £500. Transfers of existing funds are permitted, but only from accounts previously held with the building society. Savers are also required to provide 120-days’ notice before withdrawing funds or face a loss of interest.

Savers who are looking to fix their Isa rate should look to Tesco’s 1 Year Fixed Rate Cash Isa and Nationwide’s Three Year Fixed Rate Isa, which pay 1.65% and 2.25% respectively. Both accounts can be opened with a deposit of £1 and accept transfers in.

4. Adopt a jam–jar mentality

There are no rules about how many bank accounts you can have, and in fact, it can be very advantageous to set up a number of accounts for your different savings goals.

Whether it is retirement, a house deposit or even a holiday that you are saving for, the length of your goals will determine the account you require.

For instance, have an easy access account that you can dip into as you need but also put away a small amount each month into a regular saving or notice account, where there are restrictions on withdrawals but pay higher interest.

According to SavingsChampion.co.uk, the Post Office’s Online Saver (Issue 11) pays 1.3% and is a competitive savings account that allows you to have instant access to your savings without financial penalty.

While a regular savings account tends to pay a higher rate on lower balances, so you don’t need a big lump sum to invest. Worth a look is the Leeds Building Society’s Regular Saver (Issue 3), which pays 3.05%. This account includes a 1.8% bonus, providing you save £50 to £250 each month and make no more than one withdrawal in the bonus period.

5. Watch out for falling rates

Once you have your accounts up and running, it is essential that you must monitor them closely as bonus rates means that the amount of interest you earn often plummets after just 12 months.

“Even in the current low interest rate environment it’s still vital to keep a close eye on the interest you are earning, not least if you hold an account with a short term bonus,” says Susan Hannums, director at Savingschampion.co.uk. “Once the bonus on an account expires it can, in some cases, see the interest rate more than halved overnight.”

Banks offer these higher rates of interest to lure in new customers, hoping that you will keep your savings with them even after the introductory bonus period has expired.

Last year, Halifax for instance, offered an Isa Saver Online paying 1.95%, but this included a 1.70% bonus for the first 12 months – meaning savers are left with an interest rate of a paltry 0.25%. While Bank of Scotland Internet Saver account paid a less competitive 1.55% but with a 1.45% bonus for the first 12 months. As a result, these savers will now be getting just 0.10% on their hard earned cash savings.

“It’s essential to keep your money on the move on a regular basis as bonuses expire and rates change so doing nothing could cost you dearly,” said Ms Hannums.

Keep in mind that some accounts with high introductory rates have penalties in place if you withdraw money from your savings before the bonus period is up. The penalty may mean that you forego the high rate of interest and revert to the standard APR, or in some cases you could be charged for withdrawing early. Therefore it is important to look into the terms and conditions and check that you are happy with them before opening an account.

 

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  • Drf

    The key issue, you have completely failed to address. Even if one is foolish enough to believe that CPI has any relevance to the real inflation which normal people are experiencing in their everyday rising costs, with the best current ISAs unless you are prepared to lock your money away for 2 years or more it is practically impossible to SAVE, and many of those accounts with the higher interest rates do not accept transfers in from previous years; with effective negative interest rates saving has become LOSING in real value terms. Real inflation for most ordinary people (on the everyday costs which matter, such as housing, energy Council Tax, water, sewerage, motoring and commuting) is probably around 10% per annum; where can anyone get that rate after tax or in an ISA, even with a locked term?

    So “saving” has become for a vehicle for losers only, so as to be shorn of some of the purchasng power one saved, by the government and their BoE year by year. The only sound advice must thus be don’t save any more than you need for unforseen emergencies; any spare money you have should be put into real secure assets which will preserve the purchasing power value of what you originally saved.