I'm on a mission to save money in March! I'll be posting three times a week with ideas and challenges. Free free to join in! :)
I have been learning about ISAs (Individual Savings Accounts) this week. Interest rates are still awful and it's hard to find savings accounts offering more than the rate of inflation (a whopping 2.8% in February!). We're trying to save enough to put down a deposit on a house at some point in the distant future, so it makes sense to try not to lose too much to inflation!
Challenge 10 of Money Saving March is to find a better ISA!
My 1% extra bonus will run out at the end of the tax year (5th April), so it's time to start hunting for a better rate!
You can save up to £5640 in a cash ISA, or up to £11280 in a stocks and shares ISA in the current tax year (until 5th April). After that, you get a whole new tax-free allowance to play with (but you lose any unused allowances for previous years).
I have a cash ISA. I don't have the full allowance for this year though because I withdrew some of it when we moved to Bristol. Unfortunately you can't reinvest money you withdrew until the next tax year.
The best thing about ISAs is that the tax-free allowance is ADDED to the amount you saved in previous years. For example, if you have saved £3000 into an ISA in the 2012/13 tax year, you can combine it with the 2013/14 cash ISA allowance of £5760 and save a maximum of £8760 next year! People who have maximised their stocks and shares and cash ISAs every year since they started in 1999 could have over £100,000 saved by now!
The best cash ISAs are outlined by the excellent Money Saving Expert guide. Think about whether you need instant access to your money, whether you have previous ISAs to transfer in, and what your starting amount will be (although don't worry; many ISAs can be opened with just £1!).
Anyone else looking for a better ISA? Don't forget, you can only open one cash ISA per tax year, so wait until the 6th April if you've already started one in the past year!