How to Improve the Return on Your Savings

Written by Karen Bryan

silver piggy bankInterest rates on UK savings accounts have been pretty dismal of late; however, despite receiving little help from the banks average Brits have done a fantastic job saving money in recent years. These tips from SurveyCompare  will help ensure that you are getting the maximum return on your hard-earned savings.

Shop Around

Don’t commit to any account until you have thoroughly compared your options, as there can be vast differences in rates as well as conditions. If you have an account somewhere already, ask about their best offers, as many institutions have special deals for existing customers. But hold onto your money until you have checked out the competition using price comparison tools.

Know the Rules and Stick to Them

Find out about any and all details relating to your financial agreements and ensure that you are upholding your side of the bargain, because there are often steep fees for even slight deviations such as making too many withdrawals. Keep in mind that banks aren’t legally obliged to explain all that fine print for you, so you will need to read every detail, ask lots of questions and advocate for yourself.

Lock it Up

Locking your money away in a fixed rate savings account will earn you a higher rate of interest and the longer you lock it away for the better the rate will be. However, only lock away money that you are sure you won’t need, because withdrawing money early from fixed term accounts can incur rather hefty fees.

Play the Field

A recent Financial Conduct Authority (FCA) study found that new customers earn on average 0.5% more interest on their savings than existing customers do. The catch is that these premium rates are usually for a limited time only, after which point they drop considerably. To maximise your return on savings, take advantage of those amazing rates while you can and then move your money elsewhere, because in the world of finance, loyalty doesn’t pay.

Utilize Tax Free Savings

UK residents can save up to £15,240 tax-free in an Individual Savings Account (ISA) and you can choose between cash or stocks and shares options. With ISAs you don’t pay tax on any interest, income or capital gains that your savings earn and you can withdraw your money at any time. You can even have your ISA passed on to your family when you die without any inheritance tax being incurred.

Take a Risk

The best interest rates are always tied to some element of risk. For instance, investing in corporate bonds can certainly be attractive but if that company goes under you may lose your entire investment. Similarly, peer-to-peer lending (such as that offered by RateSetter) can earn above average rates though they provide little protection against defaults. Whatever you do, never risk more than you can afford to lose.

Keep Some Money Accessible

It is wise to keep an emergency fund separate from your savings, ideally worth at least several months of your salary – this way you will always have access to money should you need it unexpectedly. Without an emergency fund you may be forced to withdraw from your savings early, which can seriously undermine your efforts to get ahead.

The better you know and understand your finances the easier saving money will be. You’ll be amazed at how much extra you can save just by making a few savvy moves.