Making your hard-earned money grow

By at home

If you’re disheartened by the measly interest rates offered by most banks on savings due to the Bank of England base rate being at a historic low, it’s good to know there are ways of getting a decent return on your cash.

Before you look at investment options though, it may be wise to consider paying off any debts you have. Interest accrued on credit card balances and personal loans could well cost you more than the returns you’re likely to get on savings. If you’re in the lucky position of not having any debts to worry about, here’s how you can successfully save for that rainy day..

Savings account
Never leave any funds you don’t need to access sitting in a normal bank account. At the very least, put them into an easy access savings account. The difference between variable rate savings accounts and ordinary bank accounts is that although they won’t always offer cash cards and cheque books, you will be offered a better rate of interest.

Regular savings account
You are likely to accrue even more interest if you put money aside each month rather than just investing a lump sum. Interest rates for such accounts tend to be fixed, so you know what you are likely to get back. Be warned though – if you make withdrawals from such accounts, the interest rate could well drop so make sure you read the small print.

Fixed-term bond
If you are financially secure and can afford to put your savings away for 12 months or more, you will earn more. A fixed rate bond will guarantee a specific rate of interest if you leave your money untouched until maturity. As a general rule of thumb, the longer you leave your savings untouched, the higher the rate of interest offered to you.

A cash ISA
An Individual Savings Account (ISA) is a tax-free way of investing up to £3,600 per year. A fixed-rate ISA, where you put your money away for at least one year, gets you a decent return – the best cash ISA rates range from 3% from Marks & Spencer to 3.51% from RBS and NatWest.

Stocks and shares ISAs
If you don’t want to buy stocks and shares in companies, you can invest in the stock market through Stocks and Shares ISAs, which are tax-free investments like cash ISAs that you can invest up to £7,200 a year in.

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