Six questions about the new Savings Bond answered

Questions about the new Savings Bond

We all probably wish we were saving more money, but with interest rates so low, you would be forgiven for being put off.

See also: How to pick a savings account

See also: Why are Brits so smug about money when we're not saving?

But help could be at hand with a new Savings Bond going on sale today, however, you might not know much about it.

So, here's six of the most pressing questions about it answered.

1.What is it?

It's called the Investment Guaranteed Growth Bond (IGGB). In simple terms, it's a savings account with fixed interest for three years and is being offered by National Savings and Investments, the organisation dealing with Premium Bonds.

2. What are the benefits?

You get to earn 2.2% interest, which in the low interest world we're currently in, could seem very attractive.

Unlike a stocks and shares investment, you are guaranteed to see your money grow, plus everything is guaranteed under the Financial Services Compensation Scheme.

3. How much can I pay in?

Anything you want, between a minimum of £100 to a maximum of £3,000. However, the investment must be made in the next 12 months.

4. When can I access my money?

To get the full amount of interest you cannot access the money for three years. This might seem like quite a long time, but there are benefits at the end of it.

If you want to get at your money earlier you will have to pay penalty charges, which will be equal to 90 days' interest.

It's also worth remembering this Savings Bond is only available online, so if you prefer to deal with things over the phone or by post, this might not be for you.

5. So how much could I make?

If you invested the maximum of £3,000 for the entire three years, you would earn about £202 in interest. But it's also worth remembering any interest you earn is subject to income tax.

6. Should I get one?

If you have between £100 and £3,000 and can afford to tie up this money for three years, then this could be worth considering.

However, it's not for everyone. If you have no savings buffer to protect you against financial shocks, like an unexpected bill, you might be better off with something allowing you to access your money when you want it.

It might also not worth paying into this bond if it means you then can't afford to pay into your workplace pension as you will miss out on contributions from your employer and tax breaks.

Another thing to consider is the interest rate. While 2.2% is certainly a good return, it's always worthwhile shopping around to see if you can find something better.

This article is provided by the Money Advice Service.

Vintage money-saving tips
See Gallery
Vintage money-saving tips
Back then there was no choice, because the mass-produced microwaveable meal was just a glint in a marketing guru's eye, but now, cooking from scratch can save substantial sums.
The older generation learned that there were meat-free days of the week to save money, and that if you had meat you''d stretch mince with breadcrumbs, or buy cheaper joints and use every scrap.
Perfect fruit and vegetables and top-of-the-range brands are a new phenomenon. Buy generic non-branded food and fruit and vegetables in whatever size and shape is most affordable

Nowadays we rush around the supermarket grabbing things we like the look of - with little idea of what we're going to do with it. Making a list and thinking about what you buy can save you thousands of pounds over the course of a year.

There's no such thing as 'left-overs' there's just the ingredients for tomorrow's dinner. The remains of the meat can be stir-fried the next day, the vegetables blended into  soup, and the potatoes saved for bubble and squeak.

Try an experiment and eliminate everything from your life with the word disposable in the title. Not only will you save money, but your bin will take far longer to fill too.

Before you bin anything, think twice about whether you can give it a second life. Think carefully, does your granny have her tried and tested tips that she has a habit of mentioning, for instance, washing out freezer bags? If you mock, you're missing a trick and wasting money and resources.
Cutting out draughts and insulating your home properly can cut 10% off your heating bill.
Back in the 1940s when no-one had central heating, people got used to wearing another layer at home. Try lowering your thermostat gradually, and only stop when those around you start to notice - you'll be surprised how much you can save.
If you save your washing and dish washing until you have a full load every time you'll save energy and save money.
Over the generations we have been sucked into believing the hype. In the days when adverts were few-and-far between, we managed without many of the things we consider essential nowadays. Re-consider what you buy, and why. Without advertising, would you buy any of it?
It's always cheaper to save in advance and plan a purchase than to rush in and borrow - which could end up costing you hundreds of pounds more in interest.
Older generations typically withdraw what they can afford to spend in cash and then leave their debit card at home or deep in their wallets. This has the advantage that they don't tend to reach for a debit or credit card and spend more than they can afford.
Because the older generations couldn't borrow their way out of trouble, they tended to plan more. Give your family a financial safety and a nest egg for the future.
Back when there were only a finite number of items of clothing to go around in a neighbourhood, people borrowed from each other for special occasions. Nowadays swapping and sharing can save substantial sums
Back in the 1940s when no-one had central heating, people got used to wearing another layer at home. Try lowering your thermostat gradually, and only stop when those around you start to notice - you'll be surprised how much you can save.
There was a time not so long ago when no-one could actually remember anyone who had actually bought a bike. They were passed through the siblings, then across family and friends networks, so that decades later, children were still learning to ride a bike for free. Of course it helps if you buy something gender-neutral, then you can hand it down, and reap the benefits as others hand expensive toys on to you.
In previous generations, neighbours would think nothing of asking each other to babysit, walk their dog, or to borrow a ladder. Nowadays we pay handsomely for babysitters and dog walkers, and each have an expensive ladder gathering dust in the shed.
The army of people who come to our homes to do odd jobs is a new phenomenon for all but the very wealthy. You may well have the skills required to complete these jobs, so get stuck in.

Ditch going out for dinner or browsing round the shops for taking a walk, visiting the beach with a picnic, or holding a family DVD night.

Nowadays we're constantly striving for a bigger TV, a flashier car and a better kitchen. Generations ago people never considered that they would ever be able to afford bigger, flashier and better, so they got on with the business of enjoying what they had.

Read Full Story