To fully understand savings accounts you have to pay attention to how they are set up. It is very easy for you to get trapped by certain savings accounts. Furthermore, you could wind up in a bank that is suffering from the economic times, which means you could feel your money is in jeopardy of being lost. Here are some top tips when comparing savings accounts that can help.
• Under UK regulations only £50,000 is protected per person by a financial institution. This means that any bank in the FSA must guarantee you £50,000 in the event they close their doors. Each depositor is guaranteed that amount or the equivalent of what they had saved if it is lower than the £50,000. Some banks are not part of the FSA and therefore do not have to offer this same protection. You need to learn which banks have this safety net.
• Protect from Inflation with the high interest savings accounts available to you. It is possible to lose money in a savings account though you may not think so. The current rate of inflation could cost you money by reducing the interest rate on your account. If you earn 2.3 percent and it suddenly drops to 1.3 percent you’ve lost earning power. Inflation can also increase the taxes, which means you are charged more for the savings you have.
• Instant access savings accounts are great products, but consider diversifying in order to protect some of your money. For example, a bit of cash in a fixed rate bond account offers a high interest rate. You earn more in three years than you might in that same three years with an ISA account. It helps you build up your savings a little quicker.
• Always use your 10,200 pounds annual tax free allowance with ISAs. Money in a savings account can be taxes, in which you lose about 20 percent of the interest you saved up. You want to use the ISA option of tax free money to avoid losing all that you managed to save through interest earned.
• Investment bonds are another way to save that might be a better fit than savings accounts. Investment bonds do have risk, but there is an attractive return on your investment.
• Instant Access Savings Accounts should be treated like they are current accounts. Capitalise on the savings you can make with the proper ISA account in order to get better interest and a return on your invested money.
• An Internet banking system makes it easy to track the account. You can see how much interest you are earning, when this rate changes and much more by gaining access online.
• Also set up some savings goals to help you prepare for holidays, buying a house or other goals. By planning you can earn more interest in the proper savings accounts.
Saving money is important, especially in uncertain climates in which a job could be lost.