Savings – who would have them? Interest rates on your savings have reached rock bottom thanks to the state of the current financial world. Fear not here is our savings guide to make sense of it all.
Before writing off the whole idea of saving – or attempting to save – in the current economic climate, however, it might be helpful to look at what your alternatives might be for any money you are not planning to spend right away. In fact the alternatives boil down to just two choices:
you do nothing at all with the money, other than perhaps put it under the mattress; or
you prefer that your money keeps on working for you, so that is remains available for the next rainy day or for a purchase best made with the strength of some savings behind you.
Who might savings be suitable for?
In this context, savings refers to your disposable income – that money which is left over, or is therefore disposable, after you have made all the necessary ongoing purchases for essentials such as housing, clothing, food, travel and the like.
Savings may be held for a relatively short period of time or they may be long-term, but the word is not used here to refer to the myriad of money saving schemes advertised by way of price cuts and offers – marketing ploys which might not always be everything they are cracked up to be, according to a report in the Telegraph newspaper about supermarkets’ pricing practices.
No, savings are what is left over once you have finished all your expenditure on the essentials – and practically everyone is likely to find even a little of a monthly income that may be saved in this way.
Typical examples of savings
Savings are typically held by way of accounts at banks, building societies or even the Post Office. But other forms of saving are also available through other vehicles, such as insurance policies, endowments and pension funds. The following examples are described in greater detail by the consumers’ champion Which? magazine:
instant access accounts – are just what they say on the tin, offering the convenience of instant access to withdraw your savings the moment you make such a request;
notice savings – just as self-explanatory is the notice savings account which requires that you give advance notice (30, 60 or 90 days’ notice, for example, depending on the particular account) of your intention to withdraw funds, but you might enjoy a higher rate of interest payable on a notice savings account;
regular savings – this is not a reference to this being a standard account but rather your agreement to continue making regular deposits into the account, typically in return for a higher rate of interest (compared to an account when you save sporadically);
fixed rate bonds – money saved in a bond is locked up within the bond for a set period of time, at a fixed rate of interest, without your being able to withdraw any of your savings, but with a rate of return typically higher the previous three types of account;
cash ISAS – the great advantage in saving through cash ISAS (Individual Savings Accounts) is that you pay no tax on the income generated by your savings, and an ISA therefore, is typically one of the first places a committed saver might look to deposit funds.
Is there anything I need to know?
You may be overwhelmed by the sheer choice of different types of saving account offered by a huge range of potential deposit takers. Careful research and the advice of financial experts before opening a particular type of savings account, therefore, is likely to prove a wise precaution.