Start saving for Christmas
CHRISTMAS and the New Year may be almost 12 months away but the sooner you start saving up for the next annual splurge the better.
Clearing any debts you ran up over Christmas should be a priority. But next comes setting money aside for the future and a regular savings account may be the best way to do it.
Saving is a sensible thing to do at any time of year but particularly after your finances have been depleted, as many people’s will be this month. If you save now then hopefully next Christmas will be less of a financial stretch.
Resolve to save
One of the easiest ways to save is to commit to paying a small, regular amount every month, said Rachel Springall, finance expert at MoneyFacts.co.uk.
“If you set up a direct debit or standing order you shouldn’t even notice the money leaving your account after a while. But it should make next Christmas less stressful and more affordable.”
There is another advantage. “While the average easy access account pays around 0.5 per cent, some regular savings accounts can pay 10 times as much with rates up to 5 per cent,” she added.
Andrew Hagger, personal finance expert at MoneyComms.co.uk, said that saving money on a regular basis is still a smart move despite low savings rates.
“The biggest obstacle for most people is getting started but now is the time to show a bit of resolve.” Regular savings accounts can offer eye-catching rates but you should also read the small print carefully.
“Most regular savings accounts only run for 12 months and do not allow any withdrawals during that period, while others insist you contribute every month to qualify for the headline rate.”
Hagger added that this should give you the financial discipline to stick to your savings routine.
“Many accounts only run for one year but after that you can put your lump sum into a fixed rate bond or tax-free cash Isa and take out a new regular saver for the next year.”
time to switch
The best rates are reserved for those who are willing to switch their current account banking at the same time.
First Direct, HSBC, M&S Bank and Nationwide Building Society all offer regular savings accounts paying 5 per cent as an incentive to switch your everyday banking over to them.
David Black, banking specialist at DJB Research, said that you typically have to pay a minimum monthly amount into your new current account and set up several direct debits.
“With First Direct’s 1st Account you have to pay in at least £1,000 a month, or maintain an average monthly balance of £1,000, otherwise you pay a monthly £10 fee,” he said.
“However if you do that, you can get a fixed rate of 5 per cent between £25 and £300 a month for 12 months on its Regular Saver Account.”
First Direct gives you an incentive to switch in the shape of a £100 welcome payment.
ADDED INTEREST
Black also highlights the M&S Monthly Saver, which pays 5 per cent on between £25 and £250 for one year, giving you a maximum of £81 interest.
To qualify, you have to open an M&S current account and pay in at least £1,250 a month and maintain two direct debits.
M&S offers the incentive of a £125 gift card plus £5 a month for the first year.
Nationwide Flex Regular Online Saver pays current account holders a variable 5 per cent for one year on between £1 and £250 per month.
“HSBC Regular Saver pays 5 per cent on £25 to £250 per month but only to HSBC Premier or HSBC Advance account holders,” Black said.
If you do not want to switch your current account you will get lower rates but the Virgin Money Regular Saver is attractive, paying a fixed 3 per cent on £1 to £250 per month.