Ten Tricks To Boost Your Savings

Saving can be hard work, which explains why it's going out of fashion. We show you how to build greater wealth with ease.

We Brits have become enthusiastic borrowers in recent years. Indeed, our personal debt (including mortgages) has grown by 9% a year over the last thirteen years. Alas, we haven't done quite so well when it comes to saving. According to the Bank of England, since the end of 1997, our savings have increased by an average of 7.5% a year.

At the end of June 2006, UK residents had over £580 billion on deposit, which averages out at £23,200 for each of the UK's 25 million households. However, as is the case with so many averages, this one flatters to deceive. In reality, the vast majority of this cash mountain is owned by a few million wealthy individuals, with the rest of us sharing the crumbs from their plates!

So, how can you become a better saver and make the most of your spare cash? The following ten tips will help you to pick the perfect savings account and earn more interest:

1. All that glisters is not gold

Don't be fooled by savings accounts with fancy-sounding names. One of my "D'Arcy Laws" states: "Financial products labelled Diamond, Gold, Platinum, Premium, etc. are generally rubbish." Hence, you should be attracted by high savings rates, not impressive account names!

2. Child Trust Funds

If you're saving for a child, most Child Trust Fund savings accounts pay decent, tax-free rates of interest. Aim to earn at least 5% a year in a CTF savings account, but bear in mind that over a long period (ten years or more), investing in the stock market is likely to generate higher returns.

3.Fix your rate

By fixing your interest rate for between one and five years, you can earn higher returns: up to 5.65% a year before tax on £500+. Then again, you lose flexibility by tying up your money, plus you may not be able to take advantage of further rate rises to come.

4. Get online

Thanks in part to their lower running costs, Internet-based accounts pay higher rates of interest than their branch-based rivals. So, if you want a tip-top rate, be prepared to point and click!

You can compare savings accounts in our Savings centre!

5. Inflation

Inflation erodes the future value of your money, because rising prices mean that £100 today buys more than it will a year from now. At the moment, one measure of inflation, the Retail Prices Index (RPI), stands at 3.3% a year, so it takes £103.30 to buy goods and services today which cost £100 a year ago.

If your savings rate after tax isn't higher than inflation, then your savings are shrinking in value. Here's a simple way to check if cash in a taxable savings account is keeping pace with the rising cost of living:

Basic-rate taxpayers: multiply your savings rate by 0.8 to get your after-tax interest rate. If the result is lower than the general rate of inflation, say, 3.3% at present, then you're losing money. Higher-rate taxpayers: multiply your savings rate by 0.6. If the result is less than inflation, then your savings are shrinking. Oops!

6. Instant or easy access?

With easy-access accounts (also known as no-notice accounts), you can't get at your money straight away. Usually, you need to wait at least three days to transfer money in and out via banking payments system BACS. These accounts pay higher rates of interest than instant-access accounts, which allow you to withdraw money on the spot, either via a cashcard or in a branch.

However, it is possible to earn very good rates of interest while still having immediate access to your money. For example, you can earn 5.10% AER with the Yorkshire BS Internet Saver account, which has an optional LINK cashcard, or 5.03% AER on £10,000+ (including a 0.55% bonus for six months) from the Citibank Flexible Saver account, which also includes a cashcard.

7. Introductory bonuses

Many top accounts in the Best Buy tables rely on short-term introductory bonuses (which typically last six months to a year) to ramp up their savings rates. This isn't a problem if you're prepared to move your money every six months or so, but look elsewhere if you don't want the hassle of surfing your cash between Best Buy accounts.

8. Regular savings

I'm not much of a regular saver, so most of my savings pot has been built up by dropping occasional lump sums into a savings account. However, if you can cope with the discipline of saving a set amount each month, then you can earn ultra-high rates of interest in a regular-savings account. By saving between £10 and £1,000 a month, you can earn anything from 6% a year before tax up to a mighty 12% a year (only for new customers opening an Alliance & Leicester Premier Current Account)!

9. Take notice or not?

It used to be the case that you could earn substantially higher rates of interest by restricting your access to your cash. For example, accounts with a 120-day notice period for withdrawals used to pay much better rates than, say, easy-access accounts. However, the Best Buy ICICI Bank HiSAVE easy-access account pays a tasty 5.15% EAR on £1+ with no strings attached, so it's hardly worth tying up your money for, say, 120 days in order to beat this rate by 0.1% a year before tax!

10.Tackle savings tax

According to independent financial researcher Moneyfacts (which powers the Fool's search engines for savings accounts, personal loans, credit cards and so on), we have a choice of more than four thousand different savings accounts!

Still, the starting point for any saver aged sixteen and over is a Best Buy cash mini-ISA, which pays tax-free interest and accepts deposits totalling up to £3,000 per tax year. Using cash mini-ISAs, a couple can squirrel away £6,000 per tax year and earn tax-free interest, out of reach from the taxman's greedy grasp! Note that you can open a cash mini-ISA with a different savings provider each tax year, so it pays to shop around for the best rates, rather than sticking with a single bank or building society.

Finally, the simplest way of boosting your savings is -- to spend less and save more, of course, so try this article for size!

More: Use the Fool to compare savings accounts, current accounts, credit cards and personal loans!