People in the UK are saving 13% less than they were a year ago. If you've cut back on your saving, it's all the more important that you save in the savviest way possible.
The bad news keeps coming. The economy is sluggish, the banks are in a mess, and now we learn that fewer people are putting aside some spare cash every month.
The figures come from NS&I and they’re pretty depressing:
Here are the details:
- 23% of Brits aren’t saving any money each month, up from 17% last spring
- the average Brit is only saving £87 each month, down from £100 a year ago
- 25% of Brits say they are less likely to save over the next three months
Now, before I go any further, I should admit that not all adults should be saving or can save.
You wouldn’t normally expect students, pensioners or the unemployed to save and there are also plenty of folk on very tight budgets who just can’t find any spare cash.
And if you’re carrying plenty of debt, it makes sense to focus on paying off your loans and credit cards before you start saving.
That said, there are millions of people who don’t have any non-mortgage debt and are earning enough money to save. And I’d argue that many of these folk should be saving more at the moment, not less.
After all, the economy looks set to stay sluggish for some time to come and that means more people are likely to hit hard times in the next couple of years. It’s easier to cope with disaster if you built up a savings cushion when you could.
And even if you can’t save as much as you’d like, you can still maximise the value of your savings by putting your money to work in the very best savings accounts and Cash ISAs.
So let’s look at some of the best accounts on offer right now…..
Cash ISAs
Cash ISAs are normally the best home for your savings. They’re low risk and offer tax-free returns. Here are the best ones right now:
Top Cash ISAs
|
Account |
Interest rate (AER) |
Notice period/term |
Minimum deposit |
Notes |
|
4.25% |
Five years |
£500 |
- |
|
|
Halifax ISA Saver Fixed |
4.15% |
Four years |
£500 |
- |
|
Santander Two Year Fixed Rate Major ISA |
4% |
Two years |
£1 |
You can earn an extra 0.1% if you Rory McIlroy wins an golf ‘major’ in the next 2 years |
|
Santander Direct ISA (Issue 9) |
3.3% |
Instant access |
£2500 |
|
If you want to get the best return, you need to lock away your money for a while. You can earn 4.25% from the Halifax ISA Saver Fixed five-year bond, but if you need to access your cash before the five year term is up, you’ll have to pay a penalty.
Savings accounts
[SPOTLIGHT]Of course, you may have used up your ISA allowance for the year already - £5,640 for a cash ISA. If that’s the case it’s worth looking at conventional savings accounts.
And the good news is that some new table-topping accounts have just been launched. In particular, Coventry Building Society’s new Telephone Saver account is now the highest paying instant access account with a cracking 3.25% rate.
Coventry has also launched an attractive fixed-rate bond. The Coventry BS Fixed Bond (134) pays 3.65% interest and you’re only locked in until 31 December 2013.
If you’re looking for a longer-term account, then the BLME Sharia Compliant five year account might appeal. Strictly speaking, it’s not a savings account – instead you receive a 4.6% ‘anticipated profit’ to comply with Sharia rules. I don’t see Sharia as a problem, but you may be put off by the £25,000 minimum deposit. Read more in Get a better rate with a Sharia savings account.
Top savings accounts
|
Account |
Interest rate (AER) |
Notice period/term |
Minimum deposit |
Bonus |
|
4.6% Anticipated profit rate |
Five years |
£25,000 |
None |
|
|
State Bank of India Hi Return Fixed Deposit |
4.5% fixed |
Five years |
£1000 |
None |
|
4% |
Three years |
£1000 |
None |
|
|
AA 2 Year Fixed Rate Savings Account |
3.8% |
Two years |
£1 |
None |
|
3.65% |
Until 31st Dec 2013 |
|
None |
|
|
3.25% |
Instant access |
£500 |
1.25% |
|
|
Santander eSaver Issue 5 |
3.2% |
Instant access |
£1 |
2.7% variable rate bonus for 12 months |
|
Kent Reliance Direct Savings Account |
3.2% |
Instant access |
£1000 |
None |
|
3.19% |
Instant access |
£1 |
2.64% bonus fixed for 12 months |
You may be thinking that even of the best of these rates aren’t that high. But remember that consumer price inflation has now fallen to 2.8% so the best Cash ISAs and savings accounts are offering an inflation-beating return.
And even if the rates don’t seem that attractive, it still makes sense to save. Who knows what the future holds?
More on savings: