What’s The Point In Saving?

best savings accounts

by Paul Forrest on 31 May, 2012

Traditionally, saving money on a regular basis was encouraged in order to become financially self-sufficient. Children from a young age would put at least a portion of their pocket money into a piggy bank, National Savings stamps or a Post Office Savings Account.

Older people these days are inclined to remind their younger relatives, friends and colleagues that in their day folk would save up for goods that they could not afford to buy. Recent generations have been more likely to take advantage of easy credit to obtain their desires.

But credit comes at a cost. Interest rates and penalty charges for late payments can considerably increase the outlay when instant gratification is the driving force for acquiring the latest car, furnishings or gadget.

The credit crunch and subsequent double-dip depression experienced over the past five years are testimony to what happens when we spend more than we can afford on items that are not really necessities.

Many people are now lumbered with horrendous levels of debt. Banks that were once the rock on which the nation stood proud have had to be bailed out by the long-suffering taxpayer. Confidence in financial institutions is at an all time low.
Those of us who try to manage our financial affairs responsibly may be forgiven for questioning the seemingly reckless strategies adopted by financial institutions in recent years. Banks used to be run in a simple but prudent fashion; savers would be rewarded out of the premiums paid by borrowers.

In recent years banks have been encumbered with debts and historical loans, dependant on the fluctuations of financial markets. So how can responsible investors rely on banks to safeguard their life savings? Indeed, when the financial institutions cannot be trusted to steward our finances, what is the point of saving at all?

Well, the signs are that some banks, at least, are reverting to the traditional banking model where deposits raised by consumers fund loans to householders and small businesses.

Here are a few reasons why people might wish to save:

• A deposit on a house purchase;
• A new car;
• Holidays or luxury items;
• Children’s education or to give children a good start in life;
• Retirement;
• Contingencies, such as potential house repairs or replacing household appliances.

There are many different types of savings plans available. To decide on what the best saving accounts are for the individual will depend on a number of factors:

• Length of time, or term, that savings will be held in the account;
• Ease of access to savings;
• Tax benefits
• Fixed rate or fluctuating return;
• Minimum acceptable investment.

Generally, the longer you tie down your savings, the higher the return will be. You need to decide where your priorities lie. If you need instant access to your savings, then the bank will not reward you so highly as if you were to leave your money untouched for a fixed term; say five years, for instance.

Another factor to consider when choosing the best savings account for you is how tax efficient your investment may be. The Government encourages people to save by offering tax incentives. Cash ISA saving plans can be very lucrative for savers because your money will grow each year but, unlike traditional savings accounts, the return on your investment is tax-free.

There are many banks and financial institutions from which to choose when looking for the best saving accounts. It would be wise and prudent to choose a bank that uses the traditional model to reward its customers. Financial strength is important as is protection for investors. Before you entrust your hard-earned cash to a bank, make sure that it is regulated by the Financial Services Authority and covered by the Financial Services Compensation Scheme.

About the Author

Paul Forrest

Paul Forrest is an experienced writer in many fields of interest and we are delighted that he will now be a regular contributor to ukmoneymarket.co.uk in 2012. paul.forrest@articlewriter.biz www.articlewriter.biz