Feeling the crunch – why do we seem so poor?
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3. Move your bank account
Banks are under fire at the moment for their high charges. But many of them also pay a miserly interest rate if you’re in the black, often as low as 0.1%.
And you don’t need to pay in a fortune – many banks offer a decent interest rate if you open an account with just £1.
Compare that to Alliance & Leicester’s Premier Direct current account, currently offering 8.5% gross interest on balances up to £2,500 until April 2009, providing you pay in at least £500 a month.
Switching bank accounts has never been easier – all you need to do is fill out a form from your new bank and they’ll transfer any standing orders and direct debits across to your new account.
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4. Make more of your savings
While the interest rate hikes of last year, and the reluctance of banks to drop rates even as the Bank of England does, is bad news for people with mortgages, it’s good news for savers.
The competitive savings market – especially with banks trying to attract you and your savings – means you can make your money work harder with very little effort. There are loads of accounts offering interest rates over the 5.25% base rate.
As with bank accounts, switching your savings account is easy. Just make sure you pick an account that suits your needs. If you think you might have to withdraw money in a hurry, you’ll probably be better off going for a no notice account.
According to Moneysupermarket, someone with £10,000 in a Royal Bank of Scotland savings account, which pays 1.65% AER, would receive £165 in interest over a year. But if they switched to an account, paying 5.64% AER, they would earn £578.81 in interest – a difference of £413.81.
If you can leave your money longer, look at accounts that pay you more interest for leaving it untouched.
By far the best at the moment is Alliance & Leicester’s Premier Regular Saver which offers 12% interest. There is a one year notice period and you must put £10 in initially and a maximum of £250 per month, but it will certainly increase at a greater rate than if your cash were just sitting in your wallet.
