Setting out to save: a simple guide to getting started
If you’ve decided it’s time to start putting away some money for a rainy day but you don’t know the best way to go about it, the best thing to do is to start simple. While many are tempted to jump straight into investment opportunities in the hope of hitting the jackpot, the reality is that playing the stock market or investing in property, for example, are activities that should be reserved only for those people who fully understand the associated risks. While investment can certainly bring handsome rewards over the long term, this is far from guaranteed. Get your timing wrong and you could be seriously out of pocket.
The best option for those of us who prefer to play it a little safer is to look into saving. First and foremost, though, be sure to clear any outstanding debts as your first course of action. Interest on savings will be heavily outweighed by the interest charged on credit card debts and the like, so be sure you’re on an even keel before proceeding.
If you’re UK-based, then your first port of call when looking to begin your saving should be a Cash ISA, which stands for Individual Savings Account. These are essentially tax-free savings accounts, although there is a yearly limit on how much you can use it. That limit currently stands at £5,100 per year – and the important thing to remember is that any money you put in counts towards that limit, even if you subsequently withdraw some of it. So if you deposit £3,000 and then withdraw £1,000 within the same year, your remaining limit will be £2,100 – not £3,100.
Once you’ve filled your ISA allocation, or if you’re outside the UK and therefore unable to take advantage of ISAs, then it’s time to take a look at the best savings rates available to you via savings accounts. While a fixed rate savings account will offer a guaranteed return on your money, you’ll either be required to lock your money away for a specified time or at least be penalised for withdrawing before the agreed time limit. These are ideal if you’re sure you can do without the money for the allotted time but If you’d like the peace of mind that comes with being able to access your money at any time without penalty then a standard savings account may be best for you.