Step three: Get the savings bug


Finding a spare couple of pounds down the back of the sofa or a forgotten tenner in an old coat pocket can make you feel as though you’ve won the lottery – or at least got five numbers and the bonus ball.

So why don’t we all store up our individual savings and have accounts that get the best available interest on our money?

According to Abbey, 39% of Brits are currently saving nothing and one fifth admit they have no savings at all.

The type of savings vehicle you choose will depend on when you need to access the money, with instant-access accounts offering lower interest rates than savings bonds.

Instant access accounts

Experts recommend that you have a savings buffer that would cover at least three months' salary, but ideally enough to pay for six months of outgoings. An account where you can easily access this money - or has a short notice period - is the ideal place to keep your emergency savings fund. 

If you haven't used your ISA allowance for the current tax year, then an instant access ISA should be your first port of call because any growth will be tax-free compared with the taxable 20% (or 40% if you’re a higher-rate taxpayer) on savings accounts.

People aged over 50 can save up to £5,100 in a cash ISA in 2009/10, while everyone else can save £3,600. This limit changes to £5,100 in April for people of all ages.

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Bob Perkins, technical director at Origen Perkins, adds: “Married couples and civil partners should ensure that savings income is in the right hands, particularly where one of them is a non-taxpayer.

"For most people, the first £6,475 of income can be earned free of tax, and this increases for those over 65. By making full use of your personal allowance and tax-free savings, you can potentially increase your household’s disposable income.”


If you have already used your ISA allowance, then you should look to open a 'normal' instant access account. As well as comparing interest rates, make sure you look at the small print as many of these types of accounts restrict the number of withdrawals you can make in any one year.

Many savings providers offer bonus introductory rates on instant access deals. This is a great way of boosting your return, but as bonus rates normally only last for 12 months make sure you review your account and move your money if necessary one it expires.

Most instant access savings accounts allow you to put money in on a regular basis - set up a direct debit from your current account and choose a date close to payday so that you know how much money is left for the rest of the month and you don’t go into the red.

Bear in mind that instant access savings accounts have a variable rate of interest, so check this regularly to ensure it hasn't been cut. If your rate does fall, vote with your feet and move your money elsewhere.

Regular savings accounts

If you want to start building up a savings pot then a regular savings account is a good way to ensure you put some money aside each month. Remember, it is possible to get a regular savings ISA, if you haven't used your allowance, although these are not that common so you might have to do some research to find a good deal.

Regular savings accounts tend to offer a fixed rate of interest for a pre-agreed period of time; in return, you must put a set amount into the account each month via a standing order.

Miss a payment, however, and your provider might cut your interest rate or even close your account.

Withdrawals are not normally allowed from regular savings accounts - in addition, your provider will limit the amount of money you're allowed to deposit in.

Fixed-rate savings accounts

If you've already built up a savings pot, then you should take the trouble to review the interest you are earning on a regular basis. If in doubt, call up your provider to find out.

Fixed-rate savings accounts tend to offer the more competition rates of interest, and they offer you the security of exactly how much interest you will earn over the term. They are an ideal place to keep lump sums - as long as you are prepared to lock this money away.

You can choose to fix your savings for anything from one year to five - the timeframe you choose will depend on how soon you need to access the cash and your outlook for interest rates.

Fixed-rate savings accounts rarely allow you to make a withdrawal - if you do, then the account is likely to be closed. In addition, once you've made your initial deposits you're unlikely to be allowed to put any more money in.

Again, you can opt for a taxable fixed-rate account or a fixed-rate ISA.

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