The start of a new year is the perfect opportunity to get your savings back into great shape. Find out how to get a headstart here.
If you had no choice but to run your savings down a bit in the run up to Christmas, don't panic. Building them back up again doesn't have to be the mammoth task it seems. On the other hand, if you're lucky enough to have plenty sloshing about in different savings accounts, you'll want to be sure your money is working as hard for you as it can.
Before you do anything else, join other lovemoney.com readers who are giving our Build up your savings goal a shot. Here you'll find a quick and easy step-by-step guide to becoming a savvy saver.
Set a savings target
You'll find saving is much more achievable if you have a target. But first, you'll need to take a good look at your budget and be realistic about how much you can reasonably afford to put away. If you don't think you can manage to save quite as much as you'd like, check out how to squeeze down your budget to free up more cash.
Check your rate
As well as finding a good home for new savings, what about the savings you already have? Have you chosen the best possible savings accounts the market has to offer? If you haven't, the time has come to check how competitive the rates on your existing savings are.
Here's a guide to the sort of rates you should be earning depending on different types of savings accounts:
|
Type of savings account |
What counts as a decent rate? |
What's the best buy account in each category? |
|
Ordinary easy access |
3%+ |
3.15% with AA Internet Extra and Birmingham Midshires Telephone Extra |
|
Notice account |
3.30%+ |
3.31% with Whiteaway Laidlaw Bank (35 day notice), 3.30% with Bradford & Bingley Notice Saver Online (60 day notice) |
|
Fixed rate bond* |
Short-term bond (1yr) - 3.5%+ Short-term bond (2yrs) - 4%+ Long-term bond (5yrs) - 5%+ |
1 Year: 3.75% with State Bank of India 2 Years: 4.25% with ICICI, Bank of Cyprus & the AA 5 Years: 5.25% with Halifax & State Bank of India |
|
Easy access Cash ISA |
2.50%+ tax-free |
2.65% with Standard Life Cash ISA Direct Access |
|
Easy access ISA transfers |
2.50%+ tax-free |
3% with Abbey Cash ISA on transfers over £9,000 |
|
Fixed Rate Cash ISA |
Short-term bond (1yr) - 3.30%+ Short-term bond (2yrs) - 3.50%+ Long-term bond (5yrs) - 4.50%+ All rates are tax-free |
1 Year: 3.33% with Bank of Cyprus UK Cash ISA Bond 2 Years: 3.75% with Bradford & Bingley 2 Year eISA 5 Years: 4.55% with Birmingham Midshires 5 Year Fixed Rate ISA |
|
Regular saver |
4.25%+ |
4.50% with Stroud & Swindon BS & Principality BS Regular Saver. 4.25% with Barclays Bank Monthly Savings Account |
*For more market-leading rates for bonds available over different terms, check out the Top five savings bonds.
You should have a good idea of what constitutes a decent rate now. If the returns you're currently earning are below where they should be, there's only one thing to do: switch your savings. You can do that really easily using the lovemoney.com savings centre to help you find the latest best buys.
What about ISAs?
It's always a good idea to use up your ISA allowance to make the most of tax-free saving. If you have old savings held in ordinary taxable accounts, think about moving them into cash ISAs. You can save up to £3,600 per tax year. Those aged fifty or over can save up to £5,100. This higher allowance is available to everyone from 6 April.
You may be put off by the low rates offered by Cash ISAs right now. But remember, no tax is deducted, so they actually produce a better return than the current top easy access savings accounts.
If you already have money held in Cash ISAs, don't forget to check the rates on them too. Any which fail to impress can easily be transferred to the best buys. All you need to do is ask for a transfer form from the new provider, and they'll do the rest.
If you're over fifty and you have plenty of money held in ISAs, you can take advantage of a two year fixed rate ISA from Saga which offers a rate of 3.85% tax-free on transferred balances over £30,000.
Just don't make the mistake of withdrawing old ISA money and putting it into a new account. This will only use up your current ISA allowance. Transfers must always be done using the correct transfer forms from the ISA providers.
Are you a regular saver?
If you're planning to put money away on a monthly basis, you may be better off choosing a regular savings account, rather than an ordinary easy access account. Regular savers currently offer much better rates.
But there are one or two conditions you need to be aware of: you may be expected to fund the account with a minimum deposit every month. If you don't, you could be hit with a penalty. Access to your savings is normally pretty limited too, so only put money away you can afford not to touch. Find out more in The top 11 regular saver accounts
Can you afford to lock some savings away?
On the other hand, if you already have a lump sum available, and you're happy to lock it up for a while, a fixed rate bond could be right up your street. You can enjoy much more generous guaranteed rates than you would with an ordinary easy access account. But bear in mind access isn't usually permitted until the bond matures, and accounts can't be topped up so they're no good for monthly savers.
Everyone can be great at saving, even when finances feel a little overstretched. If that sounds like you don't give up. Instead check out this video on How to save when you've got no money.
And, don't forget, if you need some more help to become a savvy saver, you can scoot over to Q&A and ask other lovemoney.com readers what worked best for them.
More: The top five savings bonds | I love this savings account!