It sounds like a new age meditation, but the ‘Savings Fountain' is my concept to cut a path through the savings conundrum. Using it could easily double the interest you earn.
It's necessary because normal savings accounts aren't the first place to start with your cash. There's an order of priority to maximize your interest because different savings products work in different ways, with different rates and tax treatment.
 Two questions before you start The Savings Fountain A few variations Related articles/discuss |
 Protect your liquid assets! |
In some circumstances this can apply to your mortgage as well as credit card and loan debts too. If this is your case please first read the full ‘should I pay of debts with my savings' article.
Of course it's not just the stock market: property, wines, antiques, starting a business can all be seen as types of investment. They all involve you putting money away in the hope your assets will appreciate, but the risk you may lose cash.
If you can't afford or don't want to take any risk with your cash, then saving is for you and thus read on. If you want to invest, see the relevant articles in the Saving and Investing section.
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There are some other fountain options. Those willing to lock money away can opt for fixed rate savings accounts or cash ISAs. Also, remember as children don't pay tax their accounts are quite an efficient way to put money in (see the Use Your Child For An Extra Tax Free Allowance article).
Non-taxpayers' note
The non-taxpayers' fountain differs slightly as there's no cash ISA tax gain. Yet potential future taxpayers should still consider them as, if you open one now and don't withdraw the money, the interest should still be tax free by the time you start paying tax. It's a good preventative measure.
For those who won't ever pay tax, the fountain should start with a Regular Saver as the interest is highest. After that pick a cash ISA or savings account depending on which pays more.
Remember the rates on all these accounts will change. It's worth checking every six months or so to see if there's a higher-paying equivalent.
Married Couples Can Save Tax on Savings
If you're married and one of you pays tax at a higher rate than the other, then do make sure all the savings (providing you trust each other) are in the name of the lower rate taxpayer. This way you'll pay much less tax on the interest, saving you money. Very simple and very effective. Discuss it.
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Other Articles You May Be Interested In
Pay off debts with your savings
Savings Accounts
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