Now that you've worked out how to save money, the question is... where do you put it?
If you pay your money into a bank, building society or credit union, they’ll pay you interest on it – see it as a reward for allowing them to have use of your money.
Every bank, building society or credit union has a range of different savings products, and each of them pays different interest rates so it's best to shop around to find the best one.
The two most common savings products are ISAs and savings accounts.
ISA (Individual Savings Account)
These are very popular as they are a tax-free way of saving or investing. You don’t have to pay Income Tax or Capital Gains Tax on money saved or invested within an ISA. On many other savings products, you would pay tax on the income you earn. And you might be liable for Capital Gains Tax on any profits from your investments.
You can currently save up to £20,000 in the curren tax year.
You can save in cash, invest in stocks and shares, or a mixture of the two.
Savings Accounts
Nearly all banks and building societies offer savings accounts that pay some interest, and they all have slightly different features.
There are usually no limits on how much you can save in these each year. And often, the more money you put in, the higher the interest rate you get.
If you’ve used up your saving allowance on your ISA, you might want to open a savings account for any extra money you can save.
There are lots of things to look out for in a savings account to make sure it meets your needs. These include:
- the amount of interest paid
- how quickly you can take out your money if you need to
- the minimum amount of money you have to put in (either to open the account, or each month).