Getting the most out of savings

Whether people are saving up to fund a specific purchase or are just putting money away for a rainy day, consumers should look to take steps to make the most of their cash.

The most effective way to do this is to obtain an account that offers the best savings rate. In doing so, people will be able to benefit from an attractive interest rate. And regardless of the manner in which they choose to invest - whether it is via a one-off lump sum upon opening an account or making regular repayments - consumers could soon find that they have generated a tidy sum of cash.

Seeking out the best interest rates on savings could be particularly advisable for those wishing to fund a major one-off purchase, such as a car or holiday. Furthermore, taking the time to obtain a competitive savings account could help people looking to take their initial steps on the housing ladder. By secreting money into such a financial vehicle, prospective first-time buyers could quickly build up the amount of cash they are able to put towards their deposit on a home. And in getting the best possible deal on their savings, such people may find they are able to get a lower loan-to-value rate mortgage, potentially meaning that they have to make home loan repayments for a shorter period of time.

However, there are other benefits to getting the best savings deals than just increasing one's purchasing power. Ensuring money is being placed in the most competitive account possible could help people to cope with the impact of financial emergences with greater comfort, whether they are faced with a utility bill that is more expensive than previously anticipated or whether ill health or redundancy has resulted in a loss of income.

Getting the best possible deal on savings could also prove to be an effective way for people to make provisions for later life. In getting a good rate of return on their investment, savers may be able to increase the amount of money that they are able to draw upon in retirement.

So many ways to save

While the benefits of saving into a competitive account may seem apparent, the means of obtaining such a product could prove to be slightly more challenging.

Indeed, there are numerous accounts in which consumers can make preparations for the future and although each can prove to be effective in increasing people's saving pots, savers should look to seek out the account most suitable for their needs.

Opening an easy-access account could be particularly beneficial for consumers who need to get their hands on their savings quickly. Such a product could prove especially helpful in times of financial need, as taking advantage of the best savings rates will provide an effective boost to the money invested, which could be used towards bills or other emergencies.

Another option people may wish to consider is the individual savings account Isa. Such a product allows money to be saved on a tax-free basis, unlike other vehicles where a percentage of the interest generated goes to the taxman. People looking to take out this kind of savings account will find they can take out a cash Isa, a stocks and shares-linked account or one which allows both cash and shares-based savings. Although the first two allow a maximum of £3,600 to be saved over the course of each tax year, the latter offers an investment allowance of £7,200.

Those over the age of 50 may particularly wish to seek out the best savings rates on Isas as such people can save £5,100 in either a cash or shares-linked account, with this rising to a total of £10,200 for those accounts which combine the two. Savers under the age of 50 are due to benefit from these higher savings allowances from the start of the 2009-10 tax year.

However, those seeking out best savings accounts may also want to consider investing in a regular saver account. This sees a pre-determined amount of money tucked away each month, something which could prove useful for those looking to save to fund a specific purpose.

Fixed-rate bonds, meanwhile, allow people to generate a guaranteed amount of interest on their savings, something which could prove useful when deciding what to do with the additional money they have earned.

Seeking out the right product

However, those searching for the best savings deal for them may want to consider more than just the numerical rate of interest attached to it. In their quest to find a competitive deal, savers may also wish to take into account any terms and conditions they may be subject to, for example whether a minimum investment needs to be made each month or if there are restrictions on how much - if any at all - can be withdrawn. Taking such factors into consideration when scouring the market for best savings accounts should help consumers find the product that is most suitable for them.

Moneyextra.com recommends you take independent financial advice before acting on any article

2009-10-23 13:34:50 © Moneyextra.com