Posted on January 12, 2010.
From Piggy Bank to Savings Account: the benefits of savings As children, many of us began saving by plugging our pocket money in a piggy bank. It's a good lesson early in the management of money, but as adults, it is necessary to do more than just stash your cash under the bed.
But before you start putting your hard earned money in a savings account, you must first pay the heavy debts that you may have. This is because the interest rate on loans is generally higher than the maximum interest on savings accounts. It makes sense in paying these debts before starting to record.
The only exception to this rule is the student loan. According to Student Finance Direct: "All student loans bear interest that is linked to inflation in line with the index of retail prices. This means that in real terms, the amount you repay will be broadly the same value as the amount you have borrowed and no profit is made on the loan itself. Interest accrues on your loan until it has been fully repaid. The current interest rate is 2.4%.
If your only debt is student loans, you'd be better off financially, putting your money into a savings account with high interest and repaying the loan in small amounts when you have little money to spare.
Because of inflation, if your money is not invested or placed in an account that earns more than the current inflation rate, you're losing money. It is therefore essential that you save your money in an account that offers an interest rate that is above the current inflation rate.
There are a number of factors to keep in mind when choosing a savings account. Do you have instant access to your money, or are you happy to give weeks or months in advance? Want an account that is accessible online, or do you have a face to face with the services of a real person?
The general advice for new savers is to first open what is called an ISA (Individual Savings Account). This is a savings account where you can place a maximum of £ 3,000 per year and you are not charged tax on interest earned. Like savings accounts, the rate may vary from bank to bank, and unless the ISA is a fixed rate account, interest may change over time. It's a good idea to always check the interest rates every few months.
If you have more than £ 3,000 to save, and there are many high interest accounts, including internet saving accounts , savings bonds and instant access savings accounts accessible through your local branch, telephone, and ATMs.
Since there are so many bank and building society, it is useful to compare prices and check all the various offers and interest rates. Sometimes banks offer high interest rates to attract customers, which are then reduced after six months or a year, so it can pay to keep an eye on the interest savings account and the higher move your money around.
