Since the Royal Mail decided that it was no longer going to redeliver for free letters with a forwarding address added by the initial receiver, I have been opening my son’s mail (with his permission I might add) as he’s away at university.
Last week he got a letter warning him that the bonus interest rate he had been receiving on his savings account was about to end and the new rate was 0.5% – sadly he informed me that this was unimportant as there were only a few pence in the account!
But this does illustrate the fact that if you are trying to save, getting a decent amount of interest on your savings isn’t an easy task at the moment. Here’s what you need to consider:
- The first issue for any saver is what level of access they require to their money – instant, a fixed notice period or a fixed saving period.
- The general rule is the longer you lock your money away for, the better the interest rate – however with interest rates being so low at the moment, locking money away for a number of years at a fixed rate could see you losing out if interest rates do start to rise.
- The other advantage of making our money harder to get at is it prevents a moment of weakness over a totally gorgeous pair of boots from wrecking our holiday fund! But then it becomes a balancing act because you need to make sure that you won’t lose all your interest if you need to withdraw your savings because the car blows a gasket.
- A bit of internet research will tell you the current best interest rate for the type of savings account you want, but these deals are often short lived so always do a final check on the day you’re actually going to open the account.
- Other factors you’ll need to consider are whether you are happy to save online or whether you want to be able to walk into a branch, whether you are going to save a regular amount each month or have a lump sum now and whether you pay income tax or not.
The key message is to keep an eye on the rate of interest you are getting – not all account providers are so thoughtful as to let their customers know that they are about move to a pathetic rate – and be prepared to move your money around regularly.
Liz Dunscombe, from the money education charity Credit Action, is mum to a pair of rather tall, adult (well in age anyway!) boys. Her passion is helping people to manage their money well, and watching the transformation that a well-constructed budget can bring to a family.