Making the most of your savings and investments

It’s a good idea to have a goal in mind when you start saving. This could be short-term, like saving for a car or a holiday, or long-term, like university fees or retirement.

To work out how much you can afford to save each month, start by taking a look at what you’re currently spending. You can then look at ways to cut down your budget. (You can get more budgeting tips in our guide to managing your money).

What type of savings account you choose will depend on your goals. Generally, the longer you’re prepared to lock your money away, the more interest you can get. However, you might have to pay a penalty if you withdraw from a long-term savings account at short notice, so it’s worth considering how much flexibility you need.

The information in this guide was last updated on 06/04/2016

Instant access savings accounts give you the flexibility to get hold of your money whenever you like, without paying a fee or losing interest. Interest rates do tend to be lower than with fixed term savings.

• Instant access cash ISAs allow you to save a certain amount each year without paying tax on your interest. You can split your ISA allowance however you want between cash and Stocks & Shares ISAs.
• With instant access savings accounts you may have to pay tax on your interest, but the interest rates can be higher. Find out more about the Personal Savings Allowance.

You might choose to lock your money away for a fixed term and benefit from potentially higher rates of interest. Fixed term options may also offer introductory bonus rates that boost your savings further.

• Fixed term cash ISAs last for a set period, and may pay higher rates of interest than instant-access cash ISAs, but you usually can't access the money earlier than the fixed term without losing interest.
• Savings bonds are savings accounts where your money is locked away for a set period.