Date archives: March 6, 2020

Which is the Best Savings Account for me?

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If you want to save money you may find it frustrating that the savings account rates are so poor. As interest rates are low it means that the savings accounts are really low and this can mean that you might get frustrated at the small amount of money that you are making and hope that you can find something better. There is a range of different accounts and it is good to know more about them so that you can decide whether you might be best choosing something different which could potentially give you a better return on your money. Having a simple instant access account is what most people do but alternatives might suit them better.

Fixed rate bond

A fixed rate bond will tie your savings up at a fixed rate for a certain amount of time. Usually they will be for a minimum of a year and up to five years. The interest rate will be fixed for all of that time. The bonds will tend to pay a bonus at the end of the term but if you withdraw any money then you will not get it and your interest will be significantly lower. This means that they are best for those people that know that they will not need their money for the length of the bond. Some bonds will need a lump sum to be paid in and others will need a regular monthly payment. It will very much depend on which bond you choose.

Premium bonds

Premium bonds are government bonds. Anyone can buy the £1 bonds, although you have to buy a minimum of 25 at a time. The bonds you buy are entered in a monthly draw and if you win you will be given a monetary prize. The prizes range from £25 to £1,000,000 but the overall return tends to be low, particularly if you do not have many bonds. Although all bonds have an equal chance of winning if you have the maximum of 50,000 bonds you will have a much better chance of winning than someone that has significantly less. They are a very safe place to put your money and they can be much better than buying lottery tickets as you can get your money back. However, compared to other ways of saving, most people will find that they are not so good.

Notice account

Some savings accounts require that you give a certain amount of days notice before you withdraw the money. These accounts tend to pay more interest than other savings accounts. They may limit the amount of withdrawals you can make as well. They can be useful for getting more interest but if you think that you will need to withdraw money out quickly then they may not be a good choice for you.

ISA

An ISA is a special savings account where your interest does not attract tax. It is something that used to be popular when all interest was taxed once a person was earning over the taxable threshold. However, rules have changed now and if you earn in the first tax threshold then you will be able to earn up to £1000 a year in interest without having to pay tax. This means that ISA’s are really only now nest for those people that are higher tax payers or have a lot of savings earning lots of interest each year.

This is just a selection of the possible options. What is best for you will depend on how much you have to save, whether you want to save a lump sum or in instalments and whether you think you will need to get to your money quickly. It can be a good idea to learn a lot about the different options so that you can pick the one that is most suitable for you. It is then worth comparing different banks and building societies that offer this account to see how they compare. You will probably be most interested in the return that you will be able to get but it is worth looking at other things as well, to see if there are bonuses and penalties as well as finding out what the lender is like. As interest rates are low, you may find that the difference between the rates for different accounts is not that big. However, just a little difference could make quite a big difference to what you get back, especially if you keep your money in the account for a long or you have a lot of money. It is well worth doing the research. It is also worth making sure that you keep checking the rates because unless you are tied in to a fixed term you might be best to change your money to a different account regularly so that you can get a better rate.

How Much Should I Save up to Cover Costs of a Baby?

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If you are planning a family then it can be worth thinking carefully about your finances. Children are expensive and you will need to be prepared for the extra money that you will need to pay out for them. It might feel that they will not add much, especially when they are little and do not eat or drink much. But they grow up and they grow fast meaning costs can soon escalate and therefore it is important to be prepared for that. If you are not prepared you may end up having to get a loan to pay for everything that you need. Although this can be useful it might not be ideal and you may be in a situation where loans are not very accessible anyway if you have a poor credit score.

What costs will there be?

It is good to start by thinking about what costs there will ne. You might think this is obvious but different parents have different costs. It might be that both parents want to remain at work and so childcare needs to be paid for. It might be that one or both parents will work part-time or one will give up work and so that cost needs to be allowed for. There will also be items to buy for the baby such as car seat, cot, clothing, pram and then as they get older more clothes, bed, food, high chair and then as they get even older games consoles, school uniform, holidays, more food and even more clothing! You may be able to save money on some of these items perhaps by having them given to you by friends and family or by buying second hand. It can be difficult to calculate an exact figure and to put away all the money that you will need. However, if you can make an estimate of how much you might need for the first few years that could get you on your way.

Save up extra

It is always wise though to save up a bit extra if you can. You never know what might happen and whether you will need some extra money. Sometimes it can be too hard to go back to work or there is no job to go back to after maternity leave. It might be that the child needs more things than you allowed for. You may even find that you need extra money for things for you, perhaps needing a new car, to replace white goods or do home repairs. So, if you can put by some extra then you will have that security of knowing that you have more money in case you need it. It can make you feel more secure going into pregnancy knowing that you have a big chunk of savings available to help you.

It may take time to save this up but it could be worth the wait. Knowing that you have a financially secure future can take a lot of stress out of having a family. A family will bring its own concerns as well as many more joys, but if you can eliminate the worry of money then this will make the whole experience much more pleasurable for everyone.

Have a contingency

It is wise to have a contingency plan as well. It may not be possible to save up the money that you need in time or you may find that there are unexpected things that you have to buy or circumstances change and you start to struggle. It is really wise to think about what you might do in advance and then you will not need to worry so much.

It might be that you can plan on one of you taking on more paid work perhaps. You might be able to downsize and spend less that way. You might be able to sell some things to make money, rent out a room or something like that. It is wise to come up with a selection of ideas and then you will be able to choose one if you need to. Make sure that the things you come up with are things that you will really be prepared to do.

It might seem like quite an extreme thing to do, but planning financially for a baby can be really valuable. While you might be guessing at how much money you might need to save up, you will be doing better than not saving anything at all. You could, of course, just save everything that you can and then you will know that you have done the very best that you can possibly do. Having an idea of other things that you could do to cope can also be really reassuring as well. Having one less thing to worry about can be a great weight off your mind as you will have other things to focus on and you will not want to be distracted.