Savings

Savings schemes are a great idea as they take money out your account without you noticing allowing you forget about the money whilst building up a pot of money for you. Before you take out a savings scheme you need to decide what risks, if any, you want your savings exposed to. Generally the greater the risk the greater the potential profits but these are not guaranteed and with some saving schemes you might get back less than you originally invested.

                     ££££££££££££££££££££££££££££££££££££££££££££££££££££

Deposit accounts

These are simple bank accounts offering interest with no level of investment risk. The growth of your savings within a deposit account are however limited compared to investing in the stock market.

If you do need to make a withdrawal, you could find the interest rates get lower. Some providers specify a minimum amount you have to keep in the account.Savings accounts like these are offered by most of the high street banks and online banks such as Cahoot.

                     ££££££££££££££££££££££££££££££££££££££££££££££££££££

Share based investments

Shares are riskier than deposit accounts but can provide greater returns. The value of shares can go up as well as down which means that you may not get back as much as what as you originally invested. Shares are generally viewed a investments for at least 5 years. If you require access to your money within this timeframe then shares may not be the best place for your savings.

Investing in the shares of an individual company is riskier than investing in a broad range of different companies’ shares through either a unit trust or an investment trust.

A unit trust allows investors to buy units of a portfolio of shares whilst an investment trusts is a company that has been set up to invest in shares.

ISA

An ISA is a tax efficient wrapper for individual investment. To qualify for an ISA you have to be over 18 and UK Resident for tax purposes. All ISAs are owned by an individual. No joint ISAs, no ISAs held on behalf of others.

Plan mangers should adhere to the CAT standards as laid down by the Government for low Charges, easy Access and fair Terms.

ISAs come in two main types, namely Mini and Maxi.

You can invest up to £7,000 per tax year. The funds can be invested in up to £3,000 in shares, or, if you prefer, up to £3,000 can be invested in cash, and £1,000 in life assurance.

The monies invested in one component must stay with that component until cashed in, even if you transfer to another plan manger.

With a Maxi ISA the £7,000 must all be invested with the one company. The Maxi ISA funds have to stay with one plan manager for ALL their components.

You cannot contribute to a Maxi ISA if you have already contributed to a Mini ISA in that year. You can place each Mini ISA with a different plan manager.