How to boost your savings rate to 5%: Beat the cuts with regular savings plans, current accounts and Help To Buy cash Isas
Younger savers looking to put money aside each month don't have to suffer rock-bottom rates of as little as 0.01 per cent.
Typically, workers saving for a house, wedding or holiday use their bank's standard savings account. But these now pay next to nothing.
You can use a combination of regular savings plans, current accounts and Help To Buy cash Isas instead to boost returns by as much as a quarter.
Firstly, take a look at what your current account provider has on offer. Some have good regular savings plans — while others pay competitive rates on the money sitting in your current account.
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Typically, workers saving for a house, wedding or holiday use their bank's standard savings account. But these now pay next to nothing
Internet and telephone bank First Direct pays a fixed 5 per cent on between £25 and £300 a month through its regular savings deal for First current account holders.
On the maximum monthly saving, you'll build up £3,697 over the year, including £97 interest.
You can switch your current account to the bank or open a new one. There is no monthly fee, as long as you pay in at least £1,000 a month.
The bank also pays newcomers £100 if you switch and pay in £1,000 in the first three months.
Santander Regular eSaver pays 3 per cent, but the rate is variable — so you run the risk of seeing it cut.
Other banks pay relatively decent interest on your current account balance.
Tesco Bank is one of the easiest to navigate. It pays 3 per cent on up to £3,000 — and you don't have to move your main account to the bank or pay in a minimum sum.
But keep an eye on the rate, as it can change. You'll earn £90 interest on the full £3,000 over the year — against just £30 in the top easy-access account.
Look at basic regular savings plans, too. Virgin Money's new online account pays a fixed 2.25 per cent on up to £250 a month.
Start now and save up to £3,280 when the deal finishes on October 20 next year.
It takes ten minutes to open the account online and you don't need to provide all the usual identity documents to prove who you are and where you live.
Instead, you give the bank your current account details and it checks you out electronically.
Another big plus of this Regular E-Saver is that it works like an easy-access account. You can take out money whenever you want without paying a penalty.
There are none of the usual complicated rules about docking your interest if you take money out or miss a monthly payment.
You won't have to pay tax and it's better value than tax-free cash Isas. These have lost their appeal for regular savers starting out, following tax changes in April this year.
The new rules mean you can earn up to £1,000 interest as a basic-rate taxpayer in a basic savings account without paying tax. For higher-rate payers, it's £500.
If you are saving to buy your first home, go for a Help To Buy Isa where you'll see a 25 per cent government bonus of up to £3,000 on savings of up to £200 a month.
But beware: you can't use the bonus at the initial stages of buying your home, when you put down the deposit. The Government only pays it — through your solicitor — when you complete the purchase.
And the scheme is only on offer if your home costs up to £250,000 outside London, and £450,000 in the capital.
Top deals include Barclays at 2.27 per cent. Nationwide, Virgin, HSBC, Halifax and NatWest all pay 2 per cent.
- Check This is Money's independent best-buy tables here to find the best Help to Buy Isa
PUT YOUR MONEY TO WORK WITH A INTEREST-PAYING CURRENT ACCOUNT
The best interest-paying account for you will depend on the level of your balance and your monthly deposit amount.
Some of This is Money's top picks include:
Santander recently halved the rate on its 123 Account however it still pays 1.5 per cent on amounts between £1,000 and £20,000 plus tiered cashback on bills.
Nationwide FlexDirect pays 5 per cent interest on balances up to £2,500 - but this only for the first year. You must pay in a minimum monthly income of £1,000.
Alternatively the TSB Classic Plus Account pays 5 per cent interest on up to £2,000.
Halifax's Reward Account promises new customers £100 to switch and £5 per month if they stay in credit.
This is Money, has a regularly updated guide to the best offers carefully chosen by its expert writers our guide to the top interest-paying current accounts.
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