Looking after your savings is crucial when you have a family.
But with interest rates being low and debts getting higher, it’s tricky to do. So here’s how to protect what’s in the piggy bank.
Where should I keep my cash?
There are so many different types of accounts with various banks and building societies, it’s no wonder many of us find it a complete minefield! There are some guidelines that you can follow, though, on safer options for your hard-earned cash.
Some banks and building societies offer inflation-linked or index-linked accounts. These protect your money from going down in value. Do check the small print though, because some can tie your money up for a long time.
Premium Bonds and cash ISAs are another safe place to keep your savings. You’ll earn a reasonable amount of interest on your money, often without paying tax on it.
Do you need to get money out of your Savings account now and then? Then go for an Instant Access Savings account. The interest rate is lower, but you won’t get charged to take money out.
It’s rarely worth keeping cash in a Current Account. If you do though, opt for one that pays a higher rate of interest.
How safe are my savings?
The government-backed FSCS (Financial Services Compensation Scheme) protects your savings up to £85,000 per person per financial organisation that is regulated by the UK. So if the bank fails, you’ll get all your money back within seven days – provided you don’t have more than £85,000 in any one organisation.
If you have a joint account, this amount is double: i.e. £170,000. So if you’re lucky enough to have considerable cash savings, spread them across more than one bank/building society.
Do drill down though, because many financial organisations operate under one name. This means your £85,000 is covered between them as opposed to separately. So find out and make sure your money is spread between more than one organisation.
Protect your cash
Do repay your debts with savings – it’s rarely worth keeping both. The interest rate on debts is usually way over the interest rate on any savings account.
You’ll get a higher interest rate also if you lock up your money for longer. But consider what you might need to access for things like holidays, Christmas, school uniforms… And the boiler always breaks down just when you need it least! So think before opting for a Fixed Rate deal.
If your mortgage deal lets you, pay some off in one lump sum or in monthly instalments. This will reduce your monthly repayments. Do check first that you won’t get penalised by your mortgage deal for doing so.
So it’s not all doom and gloom. The recent financial crisis does mean any cash savings you have could currently be earning rather miserable amounts of interest. But there are things you can do to keep your family’s savings safe and dry.