The New Year is a great time to refresh your finances. Let’s face it – most of us want to save more money, or to make our existing savings work harder.
While interest rates are still low, there are still plenty of ways to take better care of your savings in 2019 and beyond. Here are just a few New Year’s savings resolutions that everyone can accomplish over the next 12 months.
1. Switch your savings account
After years in the doldrums, interest rates are finally starting to rise again. Marcus Bank, Virgin Money and the West Bromwich Building Society are all offering 1.5 per cent on their instant-access accounts. Meanwhile, Shawbrook Bank is currently advertising a 1.66 per cent cash ISA fixed for one year.
If your existing savings account is falling short of these offers, it may be time to change. Switching your account should be an easy and painless process, and many banks offer a signing-up bonus to new customers. For instance, Halifax offers £50 to anyone who switches, plus another £85 after six months.
Shop around and find the best deal for your saving needs, then bite the bullet and make the switch.
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2. Diversify your funds
This is the golden rule for all savings and investments. No matter how secure your funds are, if you are keeping them all in one place, you are putting them in unnecessary risk.
Rather than keeping all your money in one cash ISA or instant-access savings account, split your funds across a few different savings options and a few different banks.
For instance, you may wish to keep some in a current account, some bonds, and some in an ISA. That way, in the (admittedly unlikely) event that your bank or building society goes into administration, you will still be able to access some of your money instantaneously.
3. Use tax-free savings wrappers…all of them
Everyone knows about the tax-free benefits of the cash ISA, but there are plenty of other ways to avail of your tax-free savings allowance.
The Personal Savings Allowance (PSA) has been in existence since April 2016, and it allows all savers to earn up to £1,000 in tax-free interest on their savings accounts. For some people, it may make financial sense to bypass the cash ISA and put your money into a higher-paying fixed rate savings account instead – then save your ISA allowance for your stocks and shares portfolio or your pension savings.
If you are saving for a pension or a first property, the Lifetime ISA (LISA) is well worth considering. As well as offering the usual tax-free savings on all deposits, the government will add a 25 per cent bonus for every year that you invest. Unlike other ISAs, there is an annual investment limit of £4,000, and a range of age limits apply, but there aren’t many other ways to get a free £1,000 (plus interest).
Pension savers who aren’t eligible for the LISA may wish to consider a Self-Invested Personal Pension (SIPP) instead. Like the ISA, the SIPP is a tax-free wrapper, but it offers a lot more flexibility. SIPP savers can keep their money in cash, bonds gilts, stocks and shares. Unlike the ISA, up to £40,000 can be deposited in a SIPP each year, tax free. By comparison, the current annual ISA allowance is £20,000.
4. Embrace fintech
Financial technology – or ‘fintech’ – has taken the banking world by storm. Every bank now has its own mobile app, and there are a range of high-tech apps and websites that can help to streamline your finances and maximise your savings potential.
Furthermore, the advent of Open Banking means that it is easier than ever to compare different products and deals across a multitude of financial providers.
Spend some time researching money-saving apps and round-up apps, which can help you kick start your New Year’s saving habits with minimal effort.
5. Be politically aware
Never before have the worlds of politics and finance been so closely entwined. Brexit has already led to the crashing value of the pound, stock market volatility, lower interest rates and higher inflation – and the UK’s official withdrawal from the EU is still months away.
By staying well informed about the latest political developments, you may be able to make some decisions that will ultimately protect your savings, and even grow them. For instance, ongoing uncertainty could convince savers to shelter their money in long-term fixed rate bonds rather than low-paying cash savings accounts.
However, no matter what 2019 holds, it is important to keep from panicking. While the political situation may be wreaking havoc with the markets, the UK’s financial institutions are extremely robust and any major changes to your financial plans should not be taken lightly.