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Making the most of your money!

How to make your savings go further

Low interest rates may have cut into your capital’s earning potential, but there’s no need to panic. With good management you can ensure that your savings continue to grow apace - simply follow these three easy steps towards making the most of your money.

1. Open an ISA: The first step towards maximising your savings is to open an Individual Savings Account (ISA). You can invest up to £3,600 in an ISA every tax year, and the interest you earn will remain untaxed. For higher rate tax payers, that means that your savings will earn 40 per cent more interest in an ISA than in a regular savings account with the same interest rate – a massive potential bonus. Remember to shop around for the best rates, and if you need access to your money then choose an account which doesn’t penalise your for withdrawals. Bear in mind, however, that you can increase the earning potential of your savings by investing in stocks and shares or locking your money away for a longer period – Legal & General offer a number of attractive ISA options on their website, which are perfect for medium to long-term investors. If you’re a non tax payer then ensure you’re receiving gross interest on all your savings accounts by filling out a R85 form at your bank.

2. Look at fixed rate bonds: Interest rates on fixed rate bonds are often higher than those available on variable rate accounts. The only proviso is that you will need to lock up your money for a specified period – usually three to five years. Also, if interest rates rise then you could find yourself with a raw deal. If you can spare the cash long-term, however, then it’s a good idea to put a proportion of your savings into a fixed rate bond to take advantage of favourable rates.

3. Don’t miss out on special offers: Many accounts offer initial ‘bonus’ rates for new savers, which then revert to an unfavourable base rate after a year or so. Keeping abreast of the offers out there and being prepared to move your cash year-on-year will put you in a position to take advantage of the best deals. Don’t overlook current account deals either – some offer higher introductory interest rates than many savings account, as well as cash bonuses for switching.

Finally, remember it’s often best to pay off any outstanding debts before you begin saving. Start with a clean slate, and you’ll be reaping the benefit of your savings in no time.