CASH IN
Simple savings trick that is so easy you won’t even notice it and could earn you £650 a year
We explain how to know which savings account is right for you
SAVING cash is hard when money is tight - but there is an easy way to boost your funds and you won’t even notice you’re doing it.
Over ten banks now offer round-up features which mean you can automatically save cash.
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Once you’ve turned it on, every time you spend your bank will round-up the amount to the nearest pound and put the difference into a separate savings account.
So, you spend £3.40 on a coffee and the round up feature charges you £4 and puts the extra 60p into your savings account.
Your round up feature won’t send you into your overdraft – if you can’t afford the extra it won’t apply.
The idea is you can save without even really noticing the cash disappearing from your bank account.
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The average round up user saves £12.37 a week, according to Moneybox. That would build up to almost £650 a year without you having to do a thing.
That’s pretty good when you consider that around 11.5million Brits have less than £100 in their savings account, according to the Money and Pensions Service.
Although, the size of your savings pot tends to grow as you age with most under 25s having an average £3,636, while 55-year-olds have a healthier £18,245 set aside for a rainy day, a survey by Finder found.
But there is a drawback to using round-up features.
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Many banks that offer the facility pay a pitiful amount of interest on the savings you are building up.
For example, NatWest and Royal Bank of Scotland move your round up money into an eligible instant access savings account.
Their standard eligible account – the Flexible Saver – pays just 1.75%. Halifax and Lloyds pay under 2% on their eligible accounts too. The best easy-access savings accounts pay more than double that at 5.2%.
With inflation currently 2.3% any savings account paying less than that isn’t even giving you enough interest to keep pace with the rising price of goods.
With over 1,500 accounts paying interest that beats inflation, according to MoneyFacts, there really is no excuse to have your money in an account that pays less.
“While round-ups are really great for helping to get people into the savings habit, the cherry on the top is earning as much interest as you can,” says Anna Bowes, founder of Savings Champion.
If you use a NatWest or Royal Bank of Scotland Flexible Saver account for your round up gains, you’ll earn just £5.69 interest over a year – assuming you save £50 a month, according to Savings Champion.
But you can make your round ups an inflation beating savings tool with a little extra legwork. You just have to shop around and pick your round up account wisely.
For example, NatWest customers can use the Flexible Saver for their round-up pot or they can choose NatWest’s Digital Regular Saver which pays 6.17%.
That would make you £20 over 12 months on a £50 a month monthly saving.
The added benefit of this account is your round up doesn’t count towards the £150 monthly deposit limit on the account.
So, if you saved the maximum £150 a month for 12 months plus the average round-up you could build a £2,479 savings pot in just one year.
If your bank doesn’t have a round-up facility, or it pays a low interest rate, you could keep your round up savings away from your current account provider.
With the MoneyBox app you link your bank account to your MoneyBox savings account and the app takes round up savings from your current account and deposits it into its own savings account paying 4% interest.
Another option is to ditch round up and simply save into the best regular savings accounts.
These accounts offer high interest rates but limit how much you can pay in each month. So, they are great for anyone wanting to build a savings pot.
First Direct and The Co-operative Bank both offer their customers bumper rates of 7% on their regular savings accounts.
Save £50 in here each month and you’d have £623 at the end of the year including £23 interest.
“The best regular savings account that is open to all is the Principality One-Year Regular Saver Bond Issue 33 which is paying 5.5%,” says Anna Bowes.
“In this account you would earn £17.88 in interest if you saved £50 a month. But there is no access to your money until maturity.”
If you do use a round-up facility, also consider supercharging your savings effort by increasing your round-up.
Most of these services let you double how much you set aside when you spend. Go for this option and if you spent £4.50 then £1 would be put into your savings rather than 50p.
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That would mean the average spender would save £100 a month. In the worst round-up savings account that would earn just £11.38 interest.
But combine supercharged savings with the best interest rate and you would earn £40 interest and build a £1,240 savings pot in just 12 months.
How to pick the right savings account
Anna Bowes, founder of Savings Champion, explains how to pick the right savings account for you.
“It’s important to choose the right savings accounts for your needs, so that might be a regular savings account if you are starting out and building up your savings – and/or the top paying easy access accounts for money you may need to dip into,” says Anna Bowes, founder of Savings Champion.
“Once you have built up a lump sum you could also earn a little more if you are prepared to tie up your cash. A fixed term bond rate will not fall, even if the base rate is cut.
"Although the longer-term bond rates are lower than the shorter term and top easy access rates at the moment, this is a clear indication that rates are likely to fall over the next few months – so locking in at least some of your cash now for longer could be a really wise decision.
“It’s easy to find the best accounts by looking on trusted comparison websites such as SavingsChampion.co.uk. By picking the best rates you can make your money work harder, to give you more pounds in your pocket.”
Do you have a money problem that needs sorting? Get in touch by emailing [email protected].
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