How to pick a savings account

How to pick a savings account
How to pick a savings account

With all the complicated savings products on the market, it's easy to hanker after the days when saving simply meant slipping money under the mattress.

But with interest rates so low, it's more important than ever to make sure your money is working for you as hard as it can. We look at some of the different types of product on the market.

Help to buy ISA
The help to buy ISA is available to people saving to buy their first property. You can deposit up to £1,200 in the first month, and up to £200 per month thereafter - and the government will give you a 25% tax-free bonus on everything you save when you use the money to buy your first home. It's worth mentioning here because the bonus is so generous, although clearly not everyone will qualify for one, and you cannot open a Help to Buy ISA in the same year as a cash ISA.

Cash ISAs
With a cash ISA, you can save up to £15,240 a year tax-free - and you don't, as many people believe, have to tie up your money. While they've become less attractive to some with the introduction of the new personal savings allowance, a rise in interest rates could tip the balance back.

They are also good for people paying higher-rate tax - or those who think they might do so in future - and have better interest rates than ordinary easy-access savings accounts.

Instant access savings accounts
These offer great flexibility to save and spend your cash when you need to, but tend to come at the cost of lower interest rates than less flexible alternatives. With interest rates at rock bottom, they are looking particularly disappointing at the moment. However, on the plus side, the new personal savings allowance means basic rate taxpayers don't pay tax on the first £1,000 of interest on their savings (and higher-rate taxpayers don't pay tax on the first £500).

Fixed-rate bonds
If you're prepared to tie your money up for a while, fixed-rate bonds can give better rates of interest. Interest can usually be paid monthly, annually or at the end of the term. However, you need to be able to tie your money up for at least a year (and as long as five years), and there's always the risk that interest rates will rise while your money is locked away, so you need to weigh this up against the extra interest.

Current account
It's probably the last place you'd think of putting your savings, but many current accounts offer a great rate of interest in turn for a monthly fee. Whether or not these deals make sense for you will depend largely on how much money you're likely to have in the account at any one time, and how much the interest on it is offset by the fee.

Of course, even once you've decided on the type of savings account you're after, there's a dizzying number of individual products on the market - and they're changing all the time.

Your best bet is to go to a comparison website such as MoneySupermarket or MoneySavingExpert and compare rates and terms and conditions.

You'll need to consider how much you're likely to be able to save, and whether it will be the same every month. You'll also have to ask yourself whether or not you can afford to lock the money away, and if so, for how long.

But remember that you don't have to put all your savings in one place: there's no reason you can't save for your property deposit in one account, and your next holiday in another.

Eight celebrities who hate saving
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How to pick a savings account

“I am a spender,” the former Formula 1 team owner Eddie Jordon told The Telegraph. “I've always been like that. Have I got worse as I've got older? Probably, though I'd like to think I'm not irresponsible, but if there's something I see and want, then I'll get it. My mum has a great expression: "There's no hem in that garment." What she meant was that you can't put money in the hem of the garment as it was the place that little old Irish ladies would hide their money. Whatever money I've made, I want to use, while not dying in a poor house. I don't want to leave money littering the place when I go, where people have rows with each other.”

Advice from Jo Gornitzki, a spokesperson for

“Eddie is right when he says that leaving cash behind when you pop your clogs can cause family feuds - but only if you don't plan who you want to leave your money too. A bit of forward thinking - gifting money away before you die and drawing up a solid will - and the former motor racing boss can make sure his wife and kids won't come last in the money race.”

“I’m definitely a spender,” the footballer Robbie Savage told The Telegraph recently. “For me if I’ve got it, I spend it. If I’m broke in five years, I’ll have had a great time. It’s the most difficult lesson I’ve had to learn about money: you can’t take it with you. I like spending on cars, clothes, food and wine – the nice things in life. Even though I’m a spender, I’m also a grafter and I work exceptionally hard to keep it coming in. I’ve had people have a go at me for this, but I’ve had some unforgettable experiences because of my work ethic.

Advice from Kirsty MacDonald, spokesperson for accountancy practice Jackson Stephen LLP:

“There is no doubt that Robbie is one of the hardest working sports professionals in the UK. He is rarely out of the media spotlight what with his punditry work, newspaper columns and lycra clad manoeuvres following his SCD appearances. But relying on always being able to work to maintain a lifestyle is dangerous. Robbie should know that it only takes one false move in the media and he may never work again. Such a risky strategy should be balanced with a contingency plan to cover some income for a period of time in the event of catastrophe.”

“I’m a definitely a spender,” the former Status Quo guitarist Rick Parfitt told The Telegraph in January. “ I’ve never been one to save. I live for the moment and I’m fairly extravagant when it comes to people around me. In the past, I could not resist buying cars. I had a stable full of them – American cars, sport cars, limousines, everything. I spent hundreds of thousands on them. I had about eight or nine at any one time. The cars were just strewn all over the drive. I’d come out every morning, look at the weather and think, what car should I drive today?

Advice from Jasmine Birtles, founder of

“Rick and other ageing rockers wouldn’t need to keep touring if they cut back on their spending and put the money instead into solid investments that grow over time and give them a regular income. It’s nice to be in a position to spend on the things you love but it’s a bit pointless spending so much that you have to keep working just to feed your spending habit. I always tell people to think about what they love and spend on that but save on things that don’t matter so much so that you can put money into savings and investments to work for you.”

“I am an unashamed spender,” former Blue Peter presenter Janet Ellis told The Telegraph. “I love shopping and I love the idea of a bargain and will shop online or in stores. We have a good lifestyle and don’t deprive ourselves of good holidays. I have in the past maxed out on credit cards and store cards, which I wouldn’t advise anyone doing. It was fun at the time, but in terms of how much you have to repay, it is ludicrous how much they charge.”

Advice from Jo Gornitzki, a spokesperson for

“As any girl knows there's nothing better than a bit of retail therapy every now and then. But the former Blue Peter presenter should be wary of maxing out on her cards. Credit cards are great - used in the right way. Used wrongly and they can end up costing you a fortune and in a mess that sticky back plastic just can't fix.”

“I’m definitely a spender, although I’m not an impulsive spender,” the James Bond actor Roger Moore revealed to The Sunday Times. “If I go shopping, I usually know what I want before I go out. I’m not a very good saver because the lessons my father tried to instil in me about taking care of money had the opposite effect. I carry cash in my pocket as I always like to have it to hand, which means it also disappears easily as I spend it more quickly.”

Advice from Kirsty MacDonald, spokesperson for accountancy practice Jackson Stephen LLP:

“As James Bond, Roger Moore became iconic as a smooth operator. But there is nothing smooth about the way he is handling his cash here. There seems to be no control over it at all. Whilst it’s hard to be sympathetic with multimillionaire film stars, Roger’s cash leakages are probably losing him a lot more than he realises.“

“I've got some savings for a rainy day, but I don't bother looking to see if I might get a better interest rate elsewhere,” the comedian Justin Lee Collins revealed in an interview with The Telegraph. “I don't have the time or the inclination to shop around at the moment.”

Advice from Jasmine Birtles, founder of

“The sad thing is that Justin is at an age where even relatively small amounts of money put into a good investment like stocks and shares will grow into something really impressive in later life. The younger you are, the more time your investments have to grow and so the bigger they will be when you retire.

“The earning-power of a comedian can be volatile so it’s helpful to have a serious cash cushion to dip into in the bad times and help invest in your career to push it one when it seems to be faltering. It’s true that shopping around for a better savings rate right now can seem pointless but if you’re willing to tie your money up for a few years there are some good deals to be had, particularly in the peer-to-peer companies like Zopa, Ratesetter and Funding Circle. You can get, on average, between 4.5 and 5.5% with those at the moment, which is significantly better than ordinary savings accounts.”

“I’m definitely a spender,” the international playboy Howard Marks recently told The Telegraph. “When I was growing up I wondered what it would be like to win the pools. The prize money was something like £75,000. Later I had much more than that, with cardboard boxes of cash under my bed. I was very, very flash with my spending. I would fly first class, stay in five-star hotels, buy fast cars, big cars. I don't regret investing more wisely - I enjoyed it all.

Advice from Jo Gornitzki, a spokesperson for

“While I don't blame Howard for splashing his cash, the former drug smuggler and author should make sure his fortune won't go up in smoke. Yes, you should enjoy your money, but also make sure you have enough to last in old age.”

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