Image courtesy of Thomas's Pics
Image courtesy of Thomas’s Pics

These days it is really hard knowing where to put your savings if you want a good return. With interest rates being so low, the instant access savings accounts are paying very little. There are things that you can do to increase how much you are getting.

Make sure you are not paying unnecessary tax on your interest. If you are not eligible to pay tax then inform your bank and if you are paying tax, check whether you are paying the right amount and whether it would be better to move the money to an account where you do not have to pay tax.

It is worth looking at a comparison website to see which savings accounts are paying the best. It is important to note that on accounts that have variable rates, these can change and so you will need to check regularly to see whether you need to swap again in order to get a better rate. This can seem like hard work and with interest rates being so low, it may only make a difference of a few pounds a month. However, when rates start to rise, switching regularly can make a much more significant difference and so getting into the habit is a good thing.

Choosing a fixed rate could be a gamble worth trying. A fixed rate account tends to be a higher rate than instant access accounts. However, you will be tied in, perhaps for a year or several years and this means that if the rate gets better in the future, your money will be in an account where it may not be getting the best possible rate. It is hard to predict what may happen with interest rates in the future and therefore it is not always easy to know whether it is worth tying it up. You can withdraw money, but you will lose interest and so if the rate gets massively higher it could be worth doing that.

A notice account can often pay more interest than an instant access one. This works so that you will have to give a month or a specific numbers of days’ notice before making a withdrawal and as a result can pay more interest. This can be worth looking into, but you will need to keep a close eye on the account as the interest will be variable and therefore it can change at any time. If they lower the interest and you have to then wait before withdrawing the money, you may feel that you are being treated unfairly.

Another thing to consider is whether you invest the money. This is more risky because you could find that you lose the money some or all of the money that you invest but there is the potential of getting a much bigger return on the investment. It is always wise to take financial advice or spend a long time researching before doing this. You need to decide what level of risk you are willing to take and whether you can afford to lose the money. You could make a lot more, but you have to decide whether it is worth it and how much risk you are willing to take depending on how much more the potential return could be.