....Start the year off as you mean to go on
Kick starting the New Year with a savings plan of action is sensible advice. But many of us make the same mistakes with our savings year in year out - let’s make 2013 different.
We’ve listed a selection of common savings mistakes that should be avoided in order to give your savings a healthy boost.
1. Don’t leave money in an uncompetitive account
Many people are guilty of inertia and the banks and building societies take full advantage of that. You open an account which was no doubt fairly competitive to begin with, only for it to dwindle to uncompetitive levels over time. You may be unaware that the rate has dropped or, even if you are aware, you possibly can’t be bothered with the hassle of moving. But if someone handed you an extra £1,125* would you say no? That’s the simple truth of the difference between a poor paying account and one of the best easy access accounts for someone investing £50,000.
2. Why pay tax on your savings if you don’t need to?
I know that we need to pay tax but there’s no point in paying more than necessary. And, as savers are getting a pretty raw deal at the moment, it’s important to earn as much interest as possible. So if you are paying tax on a savings account, but you haven’t used up your ISA allowance yet, you’re losing out. The best variable rate ISA is paying 3.10% AER, which is a 60 days’ notice ISA from Coventry Building Society, whilst the best easy access ISA is paying 2.65% AER (Teachers Building Society Cash ISA Reward). These are equivalent to normal taxable accounts paying 3.88% and 3.31% gross respectively, for basic rate tax payers or 5.17% and 4.42% gross for higher rate taxpayers.
3. Don’t miss maturity dates
When your fixed rate bond matures and you do nothing, often the consequences are not stacked in your favour. Many of the bond maturity holding accounts pay just 0.10%, before tax. So set a reminder using the SavingsChampion.co.uk Rate Tracker service, then take a look at our best buys and move your money.
4. And the same for bonuses.
The banks and building societies are hoping that you will have other things to do when your bonus period comes to an end, when your rate will likely plummet with it. Using an account with an introductory bonus has become a way of savings life these days, but don’t let the providers enjoy the spoils of your inertia.
5. Rate Tracker; simple steps to savings success
Luckily our free Rate Tracker service can help you in the battle against poor paying rates. Rate Tracker monitors UK based savings accounts, keeping savers informed of any rate changes, including bonuses ending and fixed rate bonds maturing, along with updating customers if there are better rates to be found.
6. Loyalty rarely pays
For many providers, getting new customers seems to be their prime focus, while you’re lucky if they chuck loyal savers some scraps. Don’t be persuaded by so called “preferential rates” for existing customers as you can often do better elsewhere. HSBC, for example, offers a Premier Savings account which it claims offers preferential rates for premier current account customers but pays a shocking 0.10%.
7. Mattresses are for sleeping on.
Whilst you may feel that the banks and building societies are not a safe place to keep your cash, you do have Financial Services Compensation Scheme protection so it makes sense to earn as much interest as possible rather than leaving it under the mattress.
8. Current Accounts
Some providers offer high rates on their current account which, if used correctly, could help add a little more interest to your savings. For example, Santander offers up to 3% on balances of between £3,000 and £20,000 on its 123 account. But there is a monthly charge on this account, so make sure it’s worth it.
9. Not using allowances
As well as your ISA allowance, there may be other tax allowances waiting to be used or wasted. Does your spouse pay less tax than you? If so, consider putting more savings in their name. Then trust them not to spend the money when you’re not looking!
10. Next Christmas is coming…..
If you haven’t saved for Christmas this year you’ve probably whacked a load of money on your credit card, and we all know what an unwelcome additional headache that means. So rather than doing the same again, as well as paying off that debt, why not put a little aside each month for next year. Check our regular savings best buys for inspiration, but check the terms and conditions carefully to avoid unpleasant surprises.
* £50,000 in an account paying 2.35% gross AER would earn £1,175 per year before tax, whereas it would earn just £50 in an account paying 0.10% gross AER.