Making comparisons for wiser choices
Most households across the country are concerned about the increasing costs of living in comparison to their incomes. For many, the recent problems experienced by the economy in general have caused a great deal of hardship, and people are desperate to find a way to be prepared for future developments.
For many, this means they are looking for somewhere to accrue some sort of savings. The choices and opportunities are, however, somewhat confusing at first glance and decisions need to be subject to careful comparisons and consideration.
Many different points and key factors must be taken into consideration, obviously beginning with an individual's personal circumstances. One thing to be clear about is the question of whether it is advisable for capital to be locked away for specific periods, or whether access will be necessary.
If access to funds is a necessity, the best possible choice is to opt for an instant access ISA. With many of the deals available to be started with minimal investments, savings rates are excellent and with a cap on total possible savings, interest is tax free - a definite advantage.
Fixed rate isa types start with short term deals. These one year terms frequently do permit withdrawals, although these will be subject to penalty charges.
As a rule, savers are required to invest at least £500, or on some deals £1,000. The four top choices within this category currently carry interest rates of between 2.6 and 3.2 per cent.
Two year term options have top AERs reaching 3.7 per cent, with an investment of £1,000, while some deals requiring only £100 investments offer 3.35 per cent. In general, these are excellent choices offering a minimum of 3.3 per cent AER within the top group.
The long term ISAs, meaning commitment for three or more years, can be considered as the best isas. Top deals can achieve AERs of 4.0 per cent; similar to many available savings bonds. On many of them, rates remain fixed for a full three years. This can be an advantage if rates drop, but may represent a disadvantage if rates should rise.
The other fixed rate option is presented by bonds. Again available in terms of varying length, starting from one year deals through two and three years up to four years or longer, these deals are mostly taking advantage of individuals who are able to invest and lock away larger amounts of money at a time.
The attached rates offer excellent opportunities, but are often subject to very high initial deposits. Some of these deals require a minimum of £50,000 to be invested. Unlike with the ISA deals, none of these options allow for access to funds at any time during the pre-determined terms. Some bonds can be acquired with very low investments, but the attached rates are not as high and may actually be below those of ISAs in comparison between similar options.
Of course, rates vary significantly between short and long term bonds, but ultimately all of them are worth looking into. Potential customers should, however, consider the fact that while relatively high investments are required, when looking at terms of three years, the ISA would be a better choice, as rates are almost equal and the ISA does have the advantage of being tax free.
There are also a variety of so-called alternative bonds, which also require relatively high investment, but rates are set to either increase each year or are linked in with the rates Bank of England's rates, often keeping a certain percentage above them. This is great while rates are rising, but may cause concern if the unthinkable should happen and rates start to drop significantly again.
There are of course other options, such as using special rates offered for children's savings. Available either with or without access, investment requirements are minimal and some of the long term choices, usually ending with a child turning 18, are an excellent way of saving for further education.
The instant access choices within this area are often perfectly suited to introduce the next generation to making savings, allowning them to watch their money grow, while still beiing able to get some of their money out to buy something they have been saving up for, for instance.
There are further considerations, including investments that involve dealing in stocks; a risk not everyone is willing to take, and so-called standard accounts for savers which offer relatively good, though not excellent rates.
One thing that needs to be remembered when comparing rates of all deals is that many banks have introductory rates. While these offers are usually extremely good and certainly tempting, they will usually drop after the first year, often to disapppointingly low figures. Unless customers are prepared to move their funds to other options after the first year, these deals should be avoided.
This applies to deals across the range, so it is something that must be looked out for whatever choices an individual may have in mind. Some of the better rates in both ISAs and bonds, for instance, are subject to these so-called bonus rates.
Deciding what type of deal to go for is ultimately down to how much an individual wishes or is able to put aside each month, whether their situation allows them to leave the funds somewhere where they can not access it, and many other factors.
In any case, no matter what the circumstances or financial situation, doing some thorough research on all the options available and carefully comparing all the features and requirements involved in each of the considered deals is ultimately the best way to come to an informed decision.
This does not have to take up as much time as may be imagined, as there are sites where a whole range of financial products can be viewed alongside each other, making comparisons and decisions a whole lot easier and quicker. It may seem like a lot of effort , but it is necessary.
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