Savings 101

If you have recently made the admirable decision to start building your own financial safety net by making an effort to save a little of your expendable income every month, you may find yourself overwhelmed by the array of different savings accounts and investment options. To help guide you through the process, we’ve created our very own savings 101…

First thing’s first – if you’ve got a little put by and you want it to start doing more for you you have two main choices. You can deposit it in a savings account or you can choose to invest. Stocks and shares have become increasingly risky throughout the recession but a more secure form of investment could be a corporate bond. With a corporate bond your investment will be distributed across a variety of companies, minimising the risks involved in selecting just one. Corporate bonds come in many different shapes and sizes, some offering fixed rates of interest over a fixed period of time determined by you and your bank. Corporate bonds are currently one of the most secure ways in which to invest your money and they may do more for you than a regular savings account whilst interest rates remain low.

If you’ve made the decision to save and not invest the most important thing to research is savings interest rates. These will differ between high street banks such as Santander and online-only financial services. The most competitive rates are likely to be found through tax free ISAs but you will be restricted as to the amount that you can deposit during each financial year. A fixed term account will guarantee a fixed rate of interest for a determined period of time, which could offer reassurance within a fluctuating financial market but you risk losing out should rates suddenly rise and if flexibility and easy access to your cash are priorities for you, there are likely to be better options available. Most banks will offer some kind of online savings account offering more competitive rates than branch operated services. These kinds of accounts will also allow you to move money quickly and easily between your current and savings accounts.