With so many financial institutions offering low-interest rates, it might be tough getting the best return on your savings. However, there are a few ways to make sure that your money is still working for you.
1. Pay Off Your Debts
If your finances have not been affected by current circumstances, you need to start paying back your debts. If you are paying a high-interest rate on your debts than what you are getting on your savings, you are actually losing money. Therefore, take some of your savings and start paying off your debts. Maybe consider a same day loan to consolidate some debt.
Of course, don’t use up all your savings. You should always save some money aside for a rainy day. Do you have an outstanding balance on your credit cards? You need to save your interest payments by transferring your balance to another card with a lower rate. Next, you can pay off the owed amount over a few months.
2. Use Your ISA Allowance
In April 2016, a personal savings allowance was introduced. As such, tax-free ISAs are no longer very attractive. The personal savings allowance means even basic rate taxpayers are able to earn £1,000 of interest from their savings every year in their savings account even peer-to-peer as well as current accounts. Taxpayers who pay a higher rate should be expected to earn £500.
However, you can still use this tax year’s ISA allowance as much as £20,000. That’s because any interest that you earn from the cash ISAs will not count towards your personal savings allowance. Yes, you need to have large savings account to use your personal savings allowance. If the interest rate increases, you should be able to save a lesser amount to hit the £500 to £1,000 amount.
3. Choose A Fixed Rate Account To Get A Higher Interest
Fixed-rate accounts offer the highest savings rates because you need to avoid touching your money for a while. If you lock away your money for a longer period, you will earn more interest. However, you should avoid locking away your money for too long because if interest rates increase, your money will be tied up in an account that can’t compete.
4. Switch Your Current Account
Do you have a huge balance on your current account? Do you rarely overdraw the account? Well, you should make sure that you earn a lot of interest in it. Current accounts are a great alternative to acquiring easy access accounts. You should be able to access your cash and you will also learn a better interest rate.
5. Start Asking Your Kids To Save
Ask your kids to start saving a little amount of money from their pocket money every month. It will make a huge difference in their lives later on. It will also teach them how to manage their money. For instance, the Junior ISA allowance has increased tremendously from £4,368 up to £9,000. Any money saved in this account belongs to your child. However, they are not able to access the cash until they reach 18 years of age since it is considered a long-term savings account.
6. Move Your Money When Your Bonus Period Ends
A few savings accounts usually carry short-term bonuses that often disappear after the 1st year. Therefore, you need to review your savings plan once the bonus period ends and especially if the account you had chosen is no longer competitive. Try moving your money to a better account as soon as you can.
7. Offset Your Savings
With the current low-interest offers available, you should be able to use some of your savings to reduce the total amount of interest you are paying on your mortgage. Once you offset your mortgage, you can actually offset your savings against your mortgage debt.
You might not be credited with the interest on your savings but you will not have to pay interest on the same amount for your outstanding mortgage. For instance, if you have a £200,000 mortgage and a total of £80,000 in savings. You will only pay interest on the difference of £120,000. As such, you should be able to reduce the complete mortgage term by a few years.
If you want to start saving more money, try these and more tips for the best results!