The UK financial scene is buzzing with information insisting that interest rates on savings accounts may remain considerably low for the next two years.
The BBC purports that compared to the previous financial year, savings rates have slumped by an outstanding 1.3 per cent, which translates to £162 million.
The low interest that most banks and financial institutions offer has contributed to that fact that many Britons have been discouraged from placing their money in individual savings accounts.
As low rates are deterring Brits from opening savings accounts, lets look at some of the alternative options available:
High-interest Current Accounts
At first, the rules and regulations that a user must comply with and the rigid nature of such accounts deter many people from opting for these accounts which offer competitive rates.
The rules to operate one of these accounts usually involves paying a set amount of money in each month. Many banks work with a minimum of £250 and at least 3 or 4 direct debits.
However, the cash back benefits of such savings products are incredible.
For instance, Tesco bank pays three per cent of up to £3,000 until April 2019 as well as earning Clubcard points, but the account does require at least a £750 monthly deposit.
Nationwide FlexDirect pays a 5 per cent Annual Equivalent Rate on up to £2,500, but £1000 must be paid in each month.
You can double the cash returns by opening more than one account if you are a couple. Some banks allow an individual to open a maximum of two accounts.
How can these rates be maximised? Well, some canny users have managed to setup a complex chain of direct debits between current accounts to earn better levels of interest.
Getting and Topping Up a Pension
One way to amass more money through savings accounts is to make sure that you enrol in a regular retirement plan.
If you work in an institution with more than 50 employees, your employer may be obliged to chip in a particular amount of money in your retirement savings account.
Personally setting up a retirement savings plan and compounding the funds with the money your employer pushes your way every month is an excellent way to make the best out investing for the long term due to the tax breaks and the effects of compound interest.
Cash ISAs – Time to Consider the Stock Market?
With other savings accounts provided by various financial institutions, the interest you earn is legible for income tax, if over the personal savings allowance.
However, the interest from ISAs is free from income tax.
The ISA allowance for 2017-18 is £20,000, which one may choose to invest in a myriad of projects. For instance, a cash ISA, an investment ISA or a combination of both.
If you choose an ISAs which is flexible you may be able to withdraw the money from the account and pay it back before the end of the financial year which spans from April to April. Check the terms and conditions of the account carefully to see if this is the case.
The tax-free nature and flexibility of Cash ISAs is a great way for Britons to save money in preparation as an emergency fund. Regardless of the low-interest rates, savings accounts are a proven way to hold money safely.
But in terms of getting better rates, statistics indicate that more are turning to Stocks and Shares ISAs, which in general have performed at much higher rates than savings accounts in the last few years.