Savings - is it worth it?



This is really for those in the UK

Well with interest rates at all time lows is there any sense in saving or would it be better to do things like overpay your mortgage?


Well currently paying off more on your mortgage to me makes more sense as this can save you more in the long run especially if you are using the over payments to reduce the term of the mortgage rather than the monthly repayments. This means that the capital of the mortgage is reduced so there is less to charge interest on so each of your future monthly payments pay off a higher proportion of the capital. Now you do need to check the terms of the mortgage as to how much and how often you can overpay as if you go over this there are some big charges.


Savings wise the best on the general market appears to be National Savings. As these are 100% backed by the treasury they can offer higher rates. Also unlike other banks etc 100% of your money is protected. The income bond offered by NS&I appears to be one of the best buys offering over 1% interest it is better than almost every other account I have found. Here the interest is payed monthly into a nominated bank account. The bond can be opened with a minimum of £500 and this is the minimum balance you can keep in it.

Otherwise the premium bonds appear to be getting a resurgence. These are a prize draw type system where tax free cash prizes can be won each month. Now unless you hold a fairly large holding in the bonds you may not win all that much but you could win up to £1,000,000. your stake stays in the draw until you cash it in so you have a chance to win a prize each month. Each bond costs £1 but the minimum block you can currently buy is £25 worth.

Remember that you can, depending on you tax status, earn a certain amount of interest tax free each year. Non tax payers don't pay any tax on inertest.

Basic rate tax payer - £1000  interest free of tax

Higher rate tax payer - £500 interest free of tax

Additional rate tax payer - £0 interest free of tax

Also interest on ISAs do not count towards this limit as they are already free of tax.


So is it worth it? I would never say don't save as you should, if you can, have savings valued at least 3 preferably 6 months worth of your income. I know this is easier said than done but it is there for emergencies which we all have from time to time.


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