How to Make Money from a Savings Account: Tips from Martyn James

Consumer expert Martyn James says while the cost of living crisis is eroding purchasing power up and down the UK, some respite can be found in savings accounts

The news over the past few months has been grim. However, if you’re a saver, after a decade of junk interest rates, you can finally make your money work for you. Here is a short guide.

Make the most of your savings

Savers have had a tough decade, with many moving their money into investments and other plans that contain significant risk factors. This has led many to find that they could lose a significant amount of their savings – or in some cases, get scammed.

Higher interest rates mean you can make money with savings accounts (Image: AFP/Getty Images)

So let’s get back to basics. Your bank may increase its base account rate, so check the rate you’re currently getting. Simply switch accounts to get better rates, and some businesses offer incentives of up to £200 to transfer your balance or pay wages to a new account.

saving account

Because savings accounts have been worth watching for so long, forget everything you know and start over. Opening a savings account online is actually pretty easy – including the identity verification process.

Don’t rush to make any decisions, though. Check out comparison sites (MoneySavingExpert has a great overview of the best deals) and consider which account best fits your lifestyle.

The longer you “lock up” your funds, the higher the interest rate you will get. So if you don’t touch cash for three or five years, you’ll get a better rate. Impressively, some of these “notice” accounts lock up your cash for a month or even seven days.

Some high street banks are offering cash incentives to save with them (Image: Adobe)

So why not move the bulk of your savings into an account with a longer notice period and put the rest into a shorter notice account so you can use it in an emergency? The savings rate is now over 5%, and even the shortest notice period is as high as 2%. Some accounts offer unlimited withdrawals, others less than twice a year.

Cash ISA

Long a go-to for cautious savers, the humble cash ISA’s popularity plummeted when interest rates were in junk. But cash ISAs are now firmly back on the savers’ agenda.

They’re still a tax-free way to save money, and you can deposit up to £20,000 a year for each. If you don’t have an ISA before other key factors, the interest will continue even if you deposit the maximum amount and compound interest each year (interest on the total invested, plus the previous total).

There are a variety of ISAs to choose from, designed for people at different stages of life and with different needs. For those under 40, the Lifetime ISA gives you a 25% bonus on the money you invest if you use it to buy your first home. For young people desperate for mortgage rates and huge costs, it’s a smart way to store your home savings until your dream home is affordable.

The good news for those who stick with ISAs in their spare time is that you can transfer or consolidate them. I’ve heard some complaints about issues with the transfer process, so be sure to ask existing and new providers what’s coming next, the timeline, and any impact on interest or bonuses.

If you’re lucky enough to be in the top 5% of the population in terms of income, you may find that your savings get better tax treatment. But for the vast majority of people, this won’t be a problem.

The joy of regulation

Most importantly, better savings rates mean we can return to regulated financial products rather than being forced into risky or questionable investments. Savings accounts and ISAs are fully regulated, which means you can use the Financial Ombudsman service for free if you have a problem.

Martyn James is a leading consumer rights activist, TV and radio broadcaster and journalist.

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