COMMENT
Five Ways To Boost Your Savings Account

By Cliff D'Arcy
January 7, 2005

I did something unusually sensible (for me, anyway) at the very end of last year: I opened a first-rate savings account.

Throughout 2004, I researched and wrote about savings accounts for Fool readers, but I never quite got around to opening one myself. That's mainly because I prefer to chuck all my spare cash into the stock market, so I wasn't too bothered about making a few extra quid on what little taxable savings I had.

However, things have changed, as I need to find a safe home for a larger sum of cash. So, I opened a Best Buy account and made my first deposit. However, I'm not going to sit back and relax – I want this pot to grow as fast as possible.

Here are five ways to up your savings balance:

1. Switch to a high-interest account

If you aim to save seriously, you need to find a decent place for your money. The Bank of England's base rate is currently 4.75%, yet about 98% of savings accounts pay annual interest rates far below than this. In fact, I could only find five easy-access accounts paying more than 5% a year, which was my entry level for a Best Buy account.

You can apply for the table-topping Alliance & Leicester account, which pays 5.35% AER, and the award-winning ING Direct account (paying 5% AER) via the Fool.

2. Round up all those little pots of money

I plan to give my savings pot an extra boost by gathering together small sums of money that I've had lying around for ages. For example, I have some goods on my desk that I need to return to a store and pick up a refund of £80. Also, I'm in credit on no fewer than five credit cards, because I've guessed my final payment on a 0% card and then overpaid in order to guarantee that I wouldn't pay any interest. Embarrassingly, one of my latest 0% credit cards is more than £450 in credit, which is insane! Also, there are several cheques buried in my paper mountain, instead of earning interest in my savings account.

So, collect all that money that you have lying around the house (check the sofa), plus the money gathering dust in ancient savings accounts, moneyboxes or whisky bottles, and stick it in your shiny new account.

3. Earn tax-free interest

It's very hard to make a decent return on cash, especially after the taxman's had his slice. Basic-rate taxpayers give away a fifth (20%) of their pre-tax interest to the taxman; higher-rate taxpayers surrender two-fifths (40%). The easy way to get around this problem is to save into a cash mini-ISA. Don't let the fancy name put you off – this is simply a savings account that allows you to deposit up to £3,000 per tax year and earn interest free of tax. Learn more in Supersize Your Savings!

4. Get the regular-savings habit

Over the last year or so, I've become a big fan of regular-savings accounts. In return for saving a specified amount for, say, a year, they reward you with ultra-high rates of interest. Both Halifax and Abbey offer regular-savings accounts that pay a stonking 7% a year before tax. Using a similar account, I've managed to turn £100 a month into quite a tasty sum for my baby daughter.

5. Do the same for your kids' accounts

Once you've got your own savings in order, do the same for your spouse or partner and kids. As with accounts for grown-ups, most children's accounts pay pathetic rates of interest. However, independent financial magazine Moneyfacts lists nine easy-access children's accounts that pay annual interest of over 5%, so there is some good stuff out there. On the high street, Alliance & Leicester, Halifax and Nationwide BS all have a Best Buy children's savings account.

So, what are you waiting for? Give your savings a shot in the arm today!

More: Check out the deals in our Savings and Investing For Children centres.

Cliff owns shares in HBOS, the Halifax's parent company.