Expecting cash this Christmas?

If you're lucky enough to receive cash this Christmas as a bonus or present, why not stash it away and watch it grow?

It may be tempting to blow the lot in the January sales, but you won't get rich that way. Instead, use it as an ideal opportunity to boost your savings, review your finances, and make your future more secure.

But before you start to think about savings, you should clear any debts first. When you have a clean slate, then you can evaluate your savings and consider how best to build up funds. Your growth strategy, whether you have been given a small sum or a large City bonus, depends on your age, what you've got already and you attitude to risk.

Mind the savings gap

The first thing you need to do is look carefully at your savings and investment portfolio to find the gaps. You might have a good portfolio of buy-to-let properties, for example, but no short-term savings, or plenty in the savings pot and no pension.

A financial adviser can help you plan for the short, medium and long-term.

Do you need unbiased independent financial advice? Why not give us a call?

What if it pours?

No matter what age you are, you should think about whether you have enough funds for a rainy day. Experts advise that you should have enough to cover your outgoings for six months.

It's best to keep your emergency fund in an easy access account, such as an instant access savings account. Fortunately, there are plenty paying more than 6% at present. If you were investing £1,000 with Alliance & Leicester, for example, you can benefit from 6.5% AER on its instant access/ direct account. Other appealing offersings come from Newcastle Building Society, paying 6.43% on its savings account, while Birmingham Midshires and ICICI Bank both pay 6.41%.

Do you want to compare savings accounts?

Before signing up for a tempting rate, you need to look at the terms and conditions carefully to make sure the account is right for you. Sometimes, there are restrictions on withdrawals. For example, with some you face losing the interest for any month a withdrawal is made.

Use your tax free allowance

Everyone over 18 is allowed to invest £7,000 tax free a year in an individual savings account (ISA) and over 16s can invest £3,000 in a cash ISA. Any proceeds made in interest are free from income and capital gains tax - so make the most of them.

You can invest up to £3,000 in a mini cash ISA and up to £4,000 in a mini stocks and shares ISA or £7,000 in a maxi stocks and shares ISA. Cash ISAs are good for rainy day savings, while equity ISAs are more for medium-term savings over five to ten years.

19 December 2007 © Moneyextra.com

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Moneyextra.com recommends you should consider taking independent financial advice before acting on any article. Please contact us for help with your individual circumstances if any assistance is required.