Five ways to help maximise your savings

Many people are looking to get more out of their savings, but with interest rates still low across much of the market, how can you make your cash work harder?

Here are five options to help you get the most from your money.

  1. Switch your bank
  2. Try investing
  3. Get government bonuses
  4. Lock away your cash for longer
  5. Use an ISA for tax-efficient benefits
A woman and man speak to each other on a leather chair in an office, while flicking through a brochure.

Switch your bank

This may seem like an obvious suggestion, but you could boost your returns by simply switching your savings pot to a new provider.

At present, many people open savings accounts with their current account provider and don’t shop around. By having a look at rival providers you could move your money and earn a higher interest rate. Many providers offer generous introductory offers, sometimes even cash incentives if you’re willing to switch your current account. Always do your research before signing on the dotted line, to make sure you’re getting the right account for your financial needs.

Try investing

With low interest rates across the savings market, many people are turning to investment as they seek a higher return. Some people can be put off stocks and shares because they believe it’s a risky venture, but there are many options available depending on what level of risk you’re comfortable with.

While the value of your investment could go down as well as up, stocks and shares tend to outperform cash savings over a longer period. This means investment in stocks and shares could be worth considering if you’re looking towards the long term.

You can speak to a financial adviser to get more information about investing.

Get government bonuses

If you’re saving for a house, then some government schemes could offer you free cash to help you achieve your home ownership dream.

Both the Help to Buy ISA and the Lifetime ISA offer free government bonuses for those saving towards a deposit, and are well worth considering if you’re a would-be first-time buyer.

The Help to Buy ISA is closing its doors to new business in 2019. But the Lifetime ISA should remain open for much longer. It’s available to 18 – 39 year olds and is geared towards time buyers and those looking to build an additional savings pot for retirement, on top of the government pension.

Lifetime ISA

  • Can be opened by UK residents aged 18-39.
  • Maximum contribution of £4,000 a year based on the current tax year.
  • Contributions can be made in regular payments or lump sums.
  • Bonus applied to your Lifetime ISA account on a monthly basis, based on the amount paid in.
  • The bonus can be used at exchange or completion for your first home.
  • Lifetime ISAs can be invested in cash or stocks and shares (OneFamily only offers a stocks and shares Lifetime ISA).
  • First home purchase price of £450,000 or less.
  • Lifetime ISA must be opened for 12 months before you can withdraw money for your first home penalty free.
  • Can be used to save for a first home, for retirement or for one then the other.
  • 25% withdrawal charge for withdrawals made before age 60 and not for a first home purchase.

Help to Buy ISA

  • Can be opened by UK residents over the age of 16 wanting to save for their first home
  • Optional monthly payments of up to £200 can be made, while a lump sum deposit of up to £1,200 can be made when opening the account.
  • Once it is certain the transaction will go ahead, your solicitor/conveyancer will claim the bonus between exchange and completion. The government bonus contributes towards the overall cost of purchasing your home.
  • Can only be held as a cash savings ISA
  • First home purchase price of £250,000 or less (£450,000 or less in London only).
  • Money can be used for first home purchase once you have £1,600 saved (3 months saving full allowance).
  • Government bonus can only be redeemed against the purchase of your first home.
  • No withdrawal charge should you decide to use the money saved for something other than the purchase of your first home.

Lock away your cash for longer

If your cash is in a low-paying easy access savings account, consider locking your cash away for a longer period. Longer fixes tend to offer higher rates, so if you don’t need access to your cash for a number of years you can lock it away and achieve a higher rate.

However, be aware that if interest rates across the market rise, your fixed rate will not. So think carefully before tying your money up and only base your decision on your individual financial situation. It’s also a good idea to keep a small pot in an easy access account for emergencies.

Use an ISA for tax-efficient benefits

Whether you are saving or investing, by doing so in a tax-efficient ISA wrapper you won’t be liable to pay tax on savings interest earned or investment growth generated. Opening an ISA is quick and easy, and you can spread your cash across several types of accounts.

For instance, you can split your £20,000 annual allowance between cash and stocks and shares. You can also open up a Junior ISA for your children.

Note: Whilst we take care to ensure Talking Finance content is accurate at the time of publication, individual circumstances can differ so please don’t rely on it when making financial decisions. The opinions expressed within this blog are those of the author and not necessarily of OneFamily.