How much can you save out of a weekly budget and how much would you like to live on when you retire? Over 30% of us in the UK are failing to save, according to a report from Scottish Widows, but I’ll show you how to spring clean your finances.

You could ask yourself some important finance questions you may have been avoiding.

• Would you like to retire early? If so, when and how much would you like to have each year when you retire?

• When would you like to pay off your mortgage?

• Fancy family later? Do you have one and want to start to save for their further education?

Your financial goals can be realistic and achieved with a little planning, cutbacks plus setting aside small regular amounts of your cash. Week by week you may be amazed at how much you could save.

I’ll show you how you can achieve this with some top tips.

Analyse your spending

Check through your bank statements for the past three months and see if there are any direct debits flying out your account that you don’t even use – gym membership springs to mind!

Either carry a notebook and jot down everything you buy or keep all your receipts for one month. Even though you don’t think you fritter away your cash, the results will probably surprise you.

There’s a big difference between grabbing a cup of coffee or popping out for lunch every now and again, then realising that you’re shelling out hundreds of pounds month on Caramel Macchiatos and Pret sandwiches.

Monthly saving: up to £100 – based on an average spend of £5 every weekday.

Stick to your list

When you’re heading out to do the weekly grocery shop, don’t just walk into the supermarket without any idea of what you need.

Always create your shopping list around the meals you plan to eat that week and check the cupboards before you leave. Take advantage of any special offers, particularly on fresh meat, which you can always divide up into separate bags and then stash in the freezer.

Monthly saving: up to £120 – according to research suggesting consumers could save £10-£30

Keep energy bills down

With gas and electricity seeming like it’s constantly on the rise, it’s silly to waste energy around the house.

There are plenty of things you can do to try and keep those energy bills to a minimum, such as turning appliances off at the plug and switching off the lights; turning the thermostat down; washing at 30?C; only filling the kettle with just enough water and so on.

Monthly saving: up to £16 – according to the UK Energy Trust, doing these few things could add up to savings of £195 a year.

Savings

We’ve established that you’d probably shave at least £200 off your monthly expenditure, so what are you going to do with it all?

If you stash your cash under the mattress every month, it won’t be worth as much in 10 years as it is today.As such, I’d recommend opting for a savings account, rather than a standard current account. There are a few options available to you – all of which will ensure that your savings are protected against inflation.

When saving it is always worth being realistic with your financial goals, but that doesn’t mean you can’t aim for a high rate of inflation.

Cash ISAs

Everyone is entitled to save up to £5,640 in a cash ISA, so to maximise your return, take advantage of this tax-free savings option before looking elsewhere.

NatWest, RBS & Nationwide are all currently offering 2% AER on their instant access cash ISA.

Regular saver

If you’ve exceeded your tax-free allowance, the next best option is a regular saver. You’ll need to commit to monthly deposits, but will often be rewarded with cash bonuses and a high rate of interest.

First Direct has a fantastic 6% AER for the first 12 months with its Regular Saver account. You’ll need to sign up for a current account too as deposits are made via standing order.

Just think after one year, you could be sitting on a nest egg worth nearly £2,500. Unfortunately, this introductory interest rate doesn’t last forever, so assuming you manage to get 2.5% AER thereafter, in ten years you could have amassed a whopping £25,000 – not bad for someone that thought they couldn’t afford to save.

Other options available to you include a fixed-term account, where you’ll need to agree to lock away your cash or an instant access account, but be prepared for a lower rate of interest.

	Written by :
	Jemma is a news & research reporter for compareandsave.com.Having worked as a journalist on a number of personal finance websites; she now spends time researching and commenting on UK personal finance stories and investigating new ways to help our readers save money.For press enquiries, please visit our Media Centre page.

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Before April 1999, Personal Equity Plans (PEP) and the Tax-Exempt Savings Account (TESSA) were the smartest way to save your money, however with the introduction of the Individual Savings Account (ISA) comes a better tax free way to save your cash.

Although Personal Equity Plans are still an efficient way to save your money, you are limited to only being able to invest £2,400 per year. Tax-Exempt Savings Accounts, on the other hand, were created to assist the equity-orientated PEP by providing a way for investors to place their cash in a tax exempt account. Since the introduction of the ISA it is not possible to open a new PEP or TESSA. A great advantage of the ISA is you can now invest up to £5,640 in a cash ISA and up to £11,280 if you split this amount between cash, and stocks and shares.

An ISA is easy to open and easy to manage and there is a great variety of building societies and banks who will give highly competitive rates and offers. Choosing the ISA that is best for you can seem like a difficult task but there are professionals in every branch who can explain the benefits of their account so that you can make an informed decision.

Standard ISAs
Currently the best rate ISA to choose is a 3.5% with AA savings . This is an AA Internet Access ISA and comes with a fixed bonus of 3% for the first 12 months with a variable rate after this period.

This particular ISA works by being linked to your current account so that you can transfer your money between the two. With this ISA you are required to invest a minimum of £2,500 in order to open the account and can then save up to £5,640 in the coming tax year. This account will provide you with unlimited access to your money with annual interest and you can even keep track of your account with their easy to use online banking.

Fixed ISAs
If you would prefer to open a fixed ISA then the best option at the moment is 4.5% from Halifax. The disadvantage of a fixed ISA is that for the period set out in the agreement you are unable to withdraw any of the cash that you have invested.

The Halifax ISA Saver Fixed Account comes with a five year term in which you can’t touch your money. On the upside the interest rate will also be fixed however it will decrease with each year. After an initial £500 deposit, you will be able to invest up to £5,460 per tax year. You will be able to access this account in branch, over the phone and online so you can always manage your money. A fun bonus of this ISA is that all holders are entered into the Halifax Savers Prize Draw where every month 3 account holders will win £100,000.

Easy Access ISAs
One other great easy access ISA account that could really work for you in the coming tax year is the NatWest e-ISA. With this account your interest is variable from 3% to 3.5% and will additionally include a fixed bonus rate of 1%.

This is a limited offer from NatWest that could be withdrawn at any time so investing now could be the best thing you do for your money this year. When you open this e-ISA you will be allowed to transfer all of your cash ISAs into it and the bonus is added on to the existing interest rate from the following month.

Tax free saving is an excellent way to let your existing money grow and finding the right ISA to do this is pivotal to ensuring the highest returns to you. If you already have an ISA and you are not happy with it then the impending new tax year is a great time to swap to a better choice. Unless you are tied in to a fixed term ISA then it should be possible to release the funds in your existing ISA and place them in an account with a higher interest rate and better usability. As most ISAs will allow you to transfer your money directly from your old account, this needn’t be something which requires a lot of effort.

	Written by :
	Jemma is a news & research reporter for compareandsave.com. Having worked as a journalist on a number of personal finance websites; she now spends time researching and commenting on UK personal finance stories and investigating new ways to help our readers save money. For press enquiries, please visit our Media Centre page.

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Here are some things to bear in mind when you apply for a savings account because, let’s face it, sometimes applying for a savings account can become quite complicated, especially when you consider that each account is designed to meet different needs, and it is not simply about finding the best interest rates.

Types of savings accounts

There are several different types of savings accounts on the market, such as high interest, tax-free, and online savings accounts. The type that suits you will depend on a number of things, including how much and how often you will be saving, and how easily you want to access your cash.

How much money do you want to save?

Many of the high interest savings accounts are associated with high minimum deposits and are therefore only available to you if you commit to saving a certain amount of money, so make sure that you check this when you apply for a savings account.

Inflation

While we appreciate that inflation does not stir passion in most people, it is something to consider when it comes to your savings. If the rate of inflation is higher than your saving account’s interest rate, this means that the value of your savings is actually decreasing.

Tax

If you didn’t groan at the mention of inflation, you’re sure to groan at the sound of tax. If you are serious about your savings, you need to know what type of taxpayer you are because this could have an impact on your account. When you apply for a savings account, a good first place to stop is a Cash ISA as these are tax-free and so boost the amount of interest you can earn by up to 50%.

Access

If you need to be able to get at your money at any point, it wouldn’t be wise to invest your savings into a fixed rate bond. However, if you are not planning on needing the money for a long time, perhaps until retirement, a fixed-rate bond paying higher interest might be more appropriate. Similarly, cash ISAs are attached to an ISA limit so if you dip into your savings every now and again, you might want to get a standard instant access account for your short term savings and an ISA for your long-term savings (particularly handy if you want to still be able to access your long-term savings in an emergency without being penalised).

Withdrawals

Some savings accounts are associated with withdrawal restrictions, meaning that you are only allowed to make a set number of withdrawals from the account within a 12 month period. Going over this limit usually incurs a ‘no interest’ or ‘reduced interest’ penalty.

Interest payments

There are two typical ways to receive your interest payments, monthly or annually (although sometimes it is possible to receive quarterly payments). As a long-term saver, annual interest payments are usually preferred and monthly interest is more relevant for short term savers or those that need to dip in to savings.

Introductory offers

When you apply for a savings account it is possible that your bank or building society will offer you an introductory interest rate which will only apply for a set period of time. It is important that you establish whether you have been offered a high interest savings account, or if it is an introductory bonus offer.

Account Management

Modern times have brought about modern ways to manage your savings. No longer do you have to rush to your local branch before it closes at 5pm because you can simply open an online savings account. This would allow you to keep track of your finances from the comfort of your own home.

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Trying to maximise your savings returns can be tough. With interest rates having been held at a record low rate for over two years, it has been a difficult time for savers. And, with inflation rising to over 4 per cent, finding an account to keep pace with increases in the cost of living has been all but impossible.

So, if you’re looking to get the best return on your savings, here are four of the best types of savings accounts you should consider:

Individual Savings Accounts (ISAs)

Individual Savings Accounts, or ISAs, allow you to save a certain amount each year without paying any tax on your interest. In the tax year 2011-12 you can save up to £5,340 in a cash ISA and you will receive all your interest, as none will go to the taxman.

ISAs pay interest gross, so they can often be some of the best high interest savings accounts. Basic rate taxpayers receive 20 per cent more interest simply due to the fact that no tax is deducted – higher or additional rate taxpayers can benefit even more.

ISAs come in all shapes and sizes. Many cash ISAs offer instant access to your cash with a minimum investment of £1 while others offer fixed rates of interest if you maximise your ISA allowance with one lump sum.

Online savings accounts

It costs banks and building societies millions of pounds each year to maintain a High Street branch network. Paying overheads, such as rent for premises, heating, staff, lighting and security, costs financial institutions a huge sum.

So, as online accounts have lower overheads to manage it means that the interest rates can often be better. Many of the best savings accounts are ‘online only’ accounts, meaning that you link your savings to your bank account and make deposits and withdrawals by bank transfer through the savings account provider’s website.

Savings Bonds

If you are prepared to commit your savings for a period of between one and five years, a savings bond may offer a better rate of interest than easy access accounts.

Bonds typically offer a fixed rate of interest, although you will often find that you are penalised if you withdraw your money before the maturity of the bond.  However, as you’re committing your savings you will find that bonds are among the best high interest savings accounts.

Bear in mind that if you fix your interest rate at the outset, you won’t benefit from any rises in interest rates during the term of the bond.

Notice accounts

Notice accounts have been available for decades but still remain some of the top savings accounts.  A notice account allows access to your money, but you have to provide a notice period – this can range from a week up to around 90 days – to make a withdrawal.

Accounts with a notice period can often be managed through a branch, by post or online and offer the chance to benefit from a good rate of interest while retaining some access to your money.

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5.6 million youngsters could see the returns on their savings fall from later this year after the announcement that Child Trust Fund (CTF) holders will be banned from taking out the new Junior ISA. That’s the view of many financial experts who believe that savings returns on Child Trust Fund accounts will now be reduced in favour of the new Junior ISA savings accounts being launched this November.

Child Trust Fund holders cannot benefit from Junior ISA

Junior ISA savings accounts will come into force in November 2011 and will allow parents to save up to £3,000 per year for their child in a tax free account. However, the Government have confirmed that children who already have a Child Trust Fund account – any child born between September 1, 2002 and January 2, 2011 – will not be eligible for this new account.

Providers will concentrate focus on the best savings accounts

The Daily Mail recently reported that experts are concerned that interest rates on Child Trust Fund products will be reduced as providers compete to offer the best rates on these new savings accounts for children.

The newspaper also reports that there are just 23 Child Trust Fund investments to choose from today, compared to nearly double this amount when the CTF launched.

Savers are being urged to compare savings accounts for both Junior ISA savings accounts and Child Trust Funds in order that they ensure they are maximising the returns for their children. Experts are also calling for the Government to allow transfers from Child Trust Funds to Junior ISAs in order that all parents get to benefit from the very best savings rates.

However, the Government appears to have ruled out such transfers. A Treasury spokesman said: “While interest rates are a commercial matter for providers, we believe a sizeable and competitive CTF market will continue once Junior ISAs are introduced.”

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Millions of people with instant access savings accounts could be losing out on valuable interest by failing to compare savings accounts when their introductory bonus period comes to an end.

That’s the conclusion of a recent survey from Consumer Focus which discovered that two thirds of people with an Individual Savings Account (ISA) did not compare savings accounts when their special introductory rate ended.

Savers missing out on high interest savings accounts

The research from the consumer group also found that a quarter of ISA savers had no idea whether they received an initial interest rate bonus in the first place.

And, a third of all ISA savers questioned said that they had held their account for over five years, potentially missing out on high interest savings accounts being offered elsewhere.

Consumers urged to compare savings accounts to maximise their returns

Banks often offer high bonus rates on instant access savings accounts before reducing the rate sharply when the introductory bonus period ends. Savers are advised to keep a note of when any initial bonus interest rate ends in order that they can compare savings accounts to find a better home for their money.

Oliver Morgans from Consumer Focus, said: “Around one in three of us has a cash ISA so millions of people are likely to be losing money by not switching when their bonus rate ends.

“Unfortunately it seems that banks use higher interest rates to lure customers in and then aim to cash in on their customer’s inertia.

“Sadly ISA customers have to watch banks like a hawk if they are to get the best deals. With consumers getting a paltry return as low as 0.1 per cent on some accounts, our advice to savers is to check your rate and if you are not happy, vote with your feet and switch to an ISA that pays more.”

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New research has found that there are now ten times more fixed rate ISA savings accounts than there were ten years ago. With banks ever-increasingly determined to tempt savers with the best savings accounts (it helps them generate deposits to lend as mortgages), fixed-rate ISAs have become more popular over recent years.

Tenfold rise in availability of fixed rate ISAs

The number of fixed rate ISAs – bank savings accounts that pay interest with no tax deducted – has increased from just 14 in 2001 to 139 at the present time, the research from Moneyfacts found.  Indeed, the number of fixed interest ISA savings accounts has more than doubled in just two years.  The figures found that there were 93 fixed ISAs on the market in 2010 and just 56 a year earlier.

Banks increasingly have to offer the best savings accounts to attract deposits which they can use to fund their mortgage lending. We believe this is a result of banks’ increasing dependency on money deposited by savers to fund loan and mortgage lending because the credit crunch increased the cost of lending between banks (the LIBOR). It could also be a result of the increased press about ISAs and the tax savings they offer to consumers, making them a more attractive proposition, especially with interest rates paid on savings being so low and inflation being so high.

Compare savings rates to find the best fixed ISAs

Variable rate ISAs are an uncertain product for banks. This is because savers are able to withdraw the funds from their bank savings accounts without notice. Fixed rate ISA savings accounts, however, provide more surety for a bank as they know how long they can expect to hold onto the deposit.

With so many fixed rate ISAs on the market – almost 100 according to the research – it is important that you compare savings rates before committing your deposit for a fixed period. Many of the best savings accounts require you to commit your savings for up to five years, so you need to be certain that you find the right account.

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Not all types of savings accounts are suitable for all needs. Here’s a quick guide to which savings accounts work with which savings goals.

1. Instant Access Savings Accounts

These variable rate accounts make it easy to withdraw your money quickly, with an ATM or by making online transfers. Consider this type of account for your emergency savings. You don’t want to come up on a financial emergency and have a difficult time getting access to your emergency funds. Some instant access accounts limit the number of withdrawals you can make without losing interest, so be aware.

2. Regular Savings Accounts

These require you to deposit money every month, so they’re terrific for those who are trying to build up the discipline to save regularly. You will probably be limited in how many withdrawals you can make per year, and you may be limited as to how much money you can put into it in a given month. These accounts aren’t so good for those who have a fairly large lump sum to invest at once.

3. ISA Savings Accounts

ISAs allow you to earn interest tax-free, so they are a great place to start when you make the commitment to put money aside. With other savings accounts, your returns are diminished because interest is taxed at your usual rate. But with ISAs, interest is tax-free. Even if the interest rate on an ISA is lower than on other accounts, you could end up with a better return depending on how much it saves you in tax. Everyone should have one of these if possible.

4. Fixed Rate Bonds

With these, you get a fixed interest rate as long as you set your money aside for a set period of time. While interest rates are higher than with other accounts, you do give up access to your money during the term of the bond. You can get these for periods of one to five years, and the longer you’re willing to set aside your money, the better your return. If you expect interest rates to go up, choose a shorter term, but if you expect them to go down, select a longer term to maximise your return.

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What interest rate are you getting on your ISA savings accounts?

According to new research, it could be nowhere near as high as you think. A recent study of ISA providers found that consumers could be losing up to £1,300 every year in interest as rates are often reduced on older Individual Savings Accounts (ISAs) in favour of higher rates to new customers. This difference in interest rates could be costing savers hundreds of pounds every year.

Tax free instant access savings accounts

ISAs are accounts that let you save up to a specified limit each year tax free. Many are instant access savings accounts while other ISAs require you to commit your savings for a defined period of time.

The new research discovered that if you have invested the maximum possible into your ISA each year your total savings will now exceed £50,000. With many banks and building societies reducing interest rates on older savings accounts, you should regularly check your ISAs to ensure you are still benefiting from a good rate of interest.

Compare savings accounts to get the best deal

According to the figures, published in the Daily Telegraph, the average return paid on cash ISAs is 1.71 per cent. However, the newspaper also reports that ‘this average disguises the fact that many ISAs… …pay just 0.1 per cent.’

So, it is vitally important that you head online to compare savings accounts. It is possible to switch ISAs from one provider to another and you should regularly review your rates and switch your savings where applicable. Bear in mind that some of the best ISA savings accounts will require you to commit your savings for a set period and that you may not be able to make any withdrawals during this time.

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Recent inflation figures made depressing reading for many British savers. With annual price rises much higher than the Government’s target, trying to ensure that the return on your savings keeps pace is increasingly tough.

Recent research found that it was almost impossible to find an account that paid an inflation-beating rate of interest, even on the best savings accounts.

Inflation makes it hard for the best savings accounts to keep pace

In response to the rise in inflation, the BBC reported that ‘to overcome inflation, a basic rate taxpayer needed to find a savings account paying 5 per cent a year’. Similarly, if you pay the 40 per cent rate of tax, then you would need an account paying 6.67 per cent in order to beat inflation.

Experts have suggested that people turn to ISA savings accounts – indeed the BBC reports that of the 23 inflation-busting accounts available in the UK, nearly all of them were ISA savings accounts.

Rise in UK inflation

The cost of living in the UK rose to 4 per cent in January (from 3.7 per cent in December) according to the latest UK Consumer Prices Index (CPI) annual inflation rate. The Retail Prices Index (RPI), which includes mortgage interest payments, rose to 5.1 per cent from 4.8 per cent.

The research found that there were no savings accounts available that pay rates which overcome the RPI, while there were just 23 accounts for basic rate taxpayers that kept pace with the CPI – 21 of these were ISA savings accounts.

So, if you rely on your savings income, it is vital that you head online and regularly compare savings accounts. Make sure you check out the best rates on ISA savings accounts and that you maximise your tax-free saving every year. As inflation rises, only the best savings accounts will ensure you continue to make money in real terms.

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