Financial
advise
 • Look for the
best interest rates
When
it comes to savings, you want to maximise what you earn
from the money you are not spending. Look for the best
deal possible on the market; banks and building societies
offer varying interest rates that would be to your best
advantage to compare.
Remember, banks and building societies
rely on deposits from customers to have funds available
to be able to
give out loans
and mortgages. This means that banks and building societies
will usually have attractive savings account packages on
offer, as an incentive for new depositors.
• Compound vs. simple interest
It is also important to know
the difference between compound and simple interest,
and to know which applies to your
savings account. If you open an account with compound
interest, the
interest payments earned by your account are included
when calculating the next interest payment. In other
words, your savings will earn money faster, compared to an
account
with
simple interest.
(If your account pays simple interest, the interest
payments are based only on the amount of the original
deposit.
It does not include any additional money you may have
earned
because
of previous interest payments.)
• Expect higher interest rates
for larger deposits
The usual
interest rates for savings accounts are quite low compared
to how much interest is charged to loans
and mortgages.
However, the interest earnings will be higher if
you can manage to save more money in your account.
• Deposit regularly
In order to get into the habit of saving,
allocate a regular amount of money for your savings
every month.
You don’t
have to look at your monthly income as the sum
total of what you can spend. By putting aside a small amount
every month,
you will soon find yourself with a growing savings
account.
• Daily, monthly
or annual interest
The overall amount your
savings will earn also depends on whether you are receiving
daily, monthly
or annual interest.
Daily interest is based on your account’s total balance
at the end of each day. After calculating
the interest, this is applied immediately to your account.
Monthly interest is
usually based on the lowest balance of
your account for the month, while annual interest is paid
every year.
The type of interest payment to choose
will depend on how you want to be able
to access
your funds
and how
often
you plan
to make deposits.
Normally, annual interest
rates pay the highest, but you will be required to
keep your funds
in your account
for
the entire
year. If you need to be able to withdraw
your funds often, a savings account
with daily interest
will
let you do
so, and lets you earn as much interest
as possible with that
kind of
arrangement. This is also ideal if
you anticipate making frequent and regular
deposits to your
account. Monthly
interest, on
the other hand, is ideal if you intend
to make regular deposits every month
and do
not plan
to make too
many withdrawals. |
