What should you do with your savings?

If you are wondering what to do with your savings, you are not alone as many of us ask ourselves this question throughout our lifetime. One answer that is probably not the best option is to simply leave your money in the same account for a few years without looking at the other options open to you. Some people think they can choose one type of account to get the best savings rates and then leave their money in there until they need to use it. Thinking along these lines can have bad consequences though, especially if you have not read the small print included with your saving account. The higher rate may only have been offered as an introductory deal and only applied to your account for a set period of time. Also, the rate may only be applicable to any money above a certain amount. If you have an instant access account and fall below a certain amount for instance, you could be getting a much lower interest rate than what you were receiving originally when opening the account.

ISAs are a good option if you want to keep your money in an account for a year before making enquiries as to whether you should then move for a higher rate or stay put. The interest rate on these accounts usually remains the same for the financial year, and any interest gained on the money you invest will remain tax free. This benefit alone may outweigh and exceed any higher rates you may find elsewhere. Also this type of account allows you to invest your money in cash or in bonds so you have more control over what you want from your money. Likewise, just like another saving account you have the choice of whether to open a fixed term or instant access cash ISA account.

By thinking about what you want from your money or by thinking about what you are actually saving for, this may be a great determining factor in choosing a saving account. For example, if you are saving for a deposit on your first house it is probably best to keep the money in a fixed rate account for a period of time to get as much added interest as possible. This will then bring you closer to your saving goal within a quicker period of time than it would if you left the money in, say, an instant access account. If you want a higher interest rate but are worried you may need to dip into the money in emergency situations, a 'notice' account may be the best option for you as you give your bank advance warning of when you need to withdraw money.

The best thing to do when saving is to set yourself a number of deadlines during the year to have a look at how your money is doing in its account. It can be very easy to just invest it and then forget about it, but this can see you losing interest and not getting other benefits. Although some interest rates and advice from banks may seem confusing at first, once you have a look at the small print, understand the type of account that would benefit you most and something that suits your lifestyle at the minute, you will find the best option available to you.