A £10,000 Savings Plan

Saving a little cash is always a good idea, because at the very least, you won't be caught off guard when a little mishap occurs. You may use the brunt of your salary to pay off your mortgage, but with some cash, you won't be in too much trouble when times get hard, while in the good times you'll have more to spend on luxuries. The problem is that many people aren't sure of the most effective ways to save and get the best return on their money. It can often be quite a chore to go through all the different types of savings products and providers to find the best deal for you. So if you're looking to save some of your cash, and would like to work out a savings plan, then take a read of this article.

The First Rule – Pay Off Debt First!
Having a lot of savings at the same time as a lot of debt is rarely a good idea. If you put away a small amount of money every month when you have debts, then that's fine, because you can use it to pay for small problems like a mini insurance scheme. However, there's no point in having a £5,000 loan and £5,000 worth of savings, because the interest on the loan will almost certainly outweigh the interest on the savings, so you'll be losing money. A £5,000 loan is likely to have an interest rate of 8-12% APR, while a savings account will have 1-3% AER. It's a big difference – use the savings to pay off the debt, then start saving again.

How to Save Your Cash
Once you’re debt free (although look out for your mortgage too) you can start saving. But which product should you use? In all cases if you're saving cash, you should look to set up an ISA. These are tax free savings accounts that you'll get better returns from than regular savings accounts, which you would be taxed on. The drawback is that you can only put £3,600 a year into an ISA. However, you should always use your ISA allowance; once it's used up, then you can use a savings account. Take a look at Santander’s website for a wide range of options for your savings.

What to do with a lump sum
If you've had a good year and built up a decent amount of  cash (£5,000 or more), or you've inherited a lump sum, then aside from spending it, you may want to make it go further while you continue to build on your savings. So long as you don't need the cash for a certain period of time, then a fixed rate bond is a good place to put it. These are fixed term accounts, with fixed interest, so don't withdraw before the bond expires or you could lose your interest payment. You may want to consider the following payment plan:

30 Month Saving Plan

• £300 a month for 18 months using an ISA and savings account = £5,400 + interest.
• Put this sum in a fixed rate bond (so long as it has a higher interest rate than your ISA) for 12 months, then continue to save as you did before.
• After a further 12 months that's a further £3,600 + interest, along with your returned bond + interest. You'll more than likely have close to £10,000 by this point.