Saving Made Easy
The last year hasn't been the easiest to save your money, but with the worst of the recession over, and things slowly sliding back into place during 2010, you may want to start saving again. There are many different ways of saving, each with their own perks and drawbacks and what type of product you choose is really dependent on what you need to save for and how long this will take. If you're not sure of which product will make your money go the furthest, then take a look at this article for some quick tips. For savings, take a look at Alliance and Leicester.
When Not to Save
The golden rule of saving is not to save if you have any outstanding debt (disregarding cheap student loan debt). This is because the vast majority of debt, such as on credit cards and loans, has higher rates of interest payment than a savings product would. For instance, a personal loan might have a rate of 8%, but a savings account might only have a rate of 3% at the moment. Pay the debts off first and your return will be far better in the long term.
Savings Accounts
Savings accounts and their tax free cousins the ISA, are the most common savings products. While they are fairly simple products to get your head around – you can pay money in and often withdraw without interest penalty (although you should check for this) – they don't always have the best returns on them, particularly in the long term. Consider these products when you only want to save small amounts of cash every year and have access to it. Also, you should always consider an ISA above a savings account for the first £3200 saved each year (the maximum you can put in a cash ISA) as this will be tax free and be likely to accrue more interest.
Fixed Rate Bonds
These are effectively loans that you make to a financial institution, and then they return the money at the end of a fixed period with an interest payment on top of your initial sum. They're particularly good if you have a lump sum that you won't need for a certain amount of time – just remember that you're unlikely to be able to withdraw during the period without a considerable penalty, so you must be sure how long you want to put your money away for.
Stocks and Shares
While the stock market may confound many people, it is actually quite easy to understand when explained in common English. Stocks and shares are basically parts of a company that you can buy, and then trade on at a later time. The value of the share normally reflects company performance and potential. It's possible to set up your own trading account linked to your current account and make share trades very easily. Alternatively, you could set up a managed fund where your investments will be managed for you for a small fee. One important thing to remember about the stock market is that it's for the long term – if you go in wheeling and dealing thinking you'll make a fast buck, then, like a gambler, you'll need supreme luck on your side.
