Use A Savings Account To Help Pay Off Your Debts
At this time of financial uncertainty, the thought of taking the time to compare savings accounts may not be a priority for most people. Loan repayments, credit card bills and the mortgage is something that most are more concerned with as that proverbial rainy day has never seemed further away. There is another way to look at savings plans, though. If you have money tied up or any form of cash surplus, you could use these funds to generate an extra income, which could ultimately help to reduce your debts. Paying off your debts has to be a priority but with a little bit of time and some research, a good savings scheme could help you to consolidate your outgoings and even reduce your monthly payments.
If you do find yourself in a position to put a little bit aside, it is worth examining the best savings accounts on the market. Many high street outlets and supermarkets offer financial services and you no longer just have the option of a standard plan offered by your bank or building society. There are many ways to see a great return on your money, either in the long term or on a more regular basis and you need to be aware of the many different choices and savings accounts rates out there.
Regular savings accounts enable savers to deposit money at set periods throughout a 12-month span. This is one of the most common forms of account available to savers but will often provide a limited return in terms of interest earned over a year. Most regular savings schemes restrict access to the saver's money and may not let you pay in extra funds should you find yourself in a position to invest extra cash. Though the interest rates offered can be quite attractive, it is worth remembering that interest is only paid on the amount in the account at any one time. If you are only paying in £100 per month for example, you may not see a great return over the year.
On the other hand, an instant access account allows flexibility for the saver in terms of what they pay in and when they can withdraw their money. You are often issued an ATM card and can access your money 24 hours a day. Flexibility does come at a price though, as many of these accounts will offer a lower rate of interest.
A notice savings account will require you to give an advanced request if you wish to withdraw funds from your account. Often a bank or building society will require a period of notice before a withdrawal can be made. It has often been the case that this type of plan offers higher savings accounts rates than other schemes, but it is worth doing your homework to make sure you are benefiting from this higher rate. Banks and building societies will often offer variable rates of interest to entice new customers, so it is worth being aware that the rate can fluctuate.
Bonds provide an attractive alternative to the more orthodox savings plans on the market. Savings bonds come in a variety of forms and will allow you to save as much or as little as you want. Depending on the type you opt for, they will often allow you instant access to your money or the option to tie it up in a longer term investment. Though bonds are often accused of not offering the best returns in terms of interest rates, their security and stability make them a popular option for investors.
For long term savers, an ISA represents one of the best savings accounts on the market. Most people who have savings in a bank or building society will pay income tax on any interest accrued over the year. Cash ISAs are available in England, Scotland, Wales and Northern Ireland and allow you to save up to £5,340 in one tax year, and you will not pay tax on interest gained from your money. If you are planning to save a large amount over the year, the fact you are not paying tax on that money, as well as a decent rate of interest, could well lead to you seeing a better return than paying into a high interest account.
Alternatively you could pay into an investment ISA; the threshold for this is higher than a cash equivalent and is linked to the performance of the stock market, meaning returns can go up as well as down. There is nothing stopping you having one of each, and therefore having a maximum threshold of over £10,000 in a tax year, but you must be aware that you are limited to the amount of money you can place in ISAs in any one tax year. Some investors will use ISAs when it comes to savings for children; currently, the UK government allows savers to pay up to £3,000 into a children's ISA, meaning this is a great way to provide children with a nest egg for later life. A personal financial adviser or your bank will be able to help you find the best isas that will suit your needs.
If you decide that you're in a position to consider a savings account then your bank manager or a personal financial assistant will be able to point you in the right direction. Spending a few moments using a reputable price comparison website, which will allow you to compare savings accounts on offer, can really help you find the best plan. Whether you plan to use your savings to pay off existing debts or generate extra income to ease your financial situation, taking the time to find the best savings scheme for your situation could be one of the best decisions you ever make.