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FOOL'S EYE VIEW
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Keen readers of our Foolish articles will know that I'm in the process of selling my home. After the sale goes through next month, my family and I will be moving into a large rented property. That's right, I'm going to be renting for a while – don't look so shocked! To be honest, the decision to rent has been forced on me, thanks to my growing family and my reluctance to put all my wealth into property in order to afford a half-decent family home. To be honest, stepping up another rung on the property ladder is something that I think is just too risky at the moment - I prefer to sit this game out. However, from next month, I need a home for my housing equity. Most of it will go on deposit, but I may drip-feed some into the stock market via this cheap, simple stock-market investment. If I'm feeling particularly adventurous, I may even buy a few individual shares, but they will have to be very safe bets! As I said, the lion's share of the proceeds of my house sale will go on deposit. I'd settled on a high-interest, instant-access account with online bank Cahoot. This paid a market-beating interest rate of 5.65% AER, but Cahoot must have seen me coming, because it closed this account to new savers on Monday! Luckily, my copy of Moneyfacts magazine arrived today, so I turned to its Best Buy tables to see which accounts got its unbiased thumbs up. WARNING: Be wary of accounts that top the tables thanks to introductory bonus rates. Once your six-month bonus or whatever is up, you'll find that your account no longer looks as lovely as it did when you first met! Some companies use these one-off bonuses to manipulate the Best Buy tables, so I generally give bonus-linked accounts the push. The best thing to do is to check the Annual Equivalent Rate (AER), which gives you a better picture of the true ongoing interest rate. So, without further ado, here are the sexiest spots for your savings: Cash mini-ISAs If you're aged sixteen or over and want to save, a cash mini-ISA is a must. And don't be frightened off by the "ISA" bit – it's just a tax-free deposit account, that's all. You can put up to £3,000 a year into this account and all your interest is tax free, which means no handing over some to the taxman and no worries about tax returns. What's more, the interest rates paid by cash mini-ISAs are usually among the best: Abbey pays 5.35% AER on its Postal ISA, which means annual tax-free interest of £160.50 on £3,000. You can open this postal account with as little as £1. The best deal available via the Fool is from Intelligent Finance, which pays 5.10% AER (£153 a year on £3,000), but this account has the advantage of online access. Instant access and no-notice accounts If British savers switched to accounts that paid an extra 1% a year in interest, we'd be around £5 billion better off! Here are two of the best 'no strings attached' accounts: Alliance & Leicester's Online Saver account pays a table-topping, beats-them-all 5.35% AER. You can deposit a minimum of £1 and a maximum of £25,000 into this Internet-only account. I shall open one without delay! On, say, £3,000, this account pays annual interest of £160.50 to non-taxpayers, £128.40 to basic-rate taxpayers and £96.30 to higher-rate taxpayers. Another popular savings account comes from ING Direct, which pays 5.00% AER. This isn't the very highest rate, but this account comes highly recommended: nine out of ten Fools who replied to our Savings survey said they would recommend it to a friend. On £3,000, this account pays annual interest of £150 to non-taxpayers, £120 to basic-rate taxpayers and £90 to higher-rate taxpayers. Regular savings accounts Being bone-idle at heart, I really like regular (monthly) savings accounts, because they give me the financial discipline that I lack! For example, I'm building a little nest egg for my daughter, so £100 a month leaves my current account by direct debit and lands in her regular savings account. (Not for much longer though, as she has almost enough cash, so it's almost time to switch to stock-market saving until she's an adult!) Halifax's Regular Saver account pays a fixed rate of 6.05% AER on between £25 and £250 a month. This is a one-year account, with the interest paid on maturity, when your pot is transferred to another savings account. This account pays a higher rate of interest than any other everyday savings account, but you can't pay in lump sums - and you'll pay a stiff penalty if you miss a payment! Notice accounts At first, I decided not to mention any notice accounts, because I don't see the point of them. That's because the Best Buy instant access or no-notice accounts pay higher rates than most notice accounts. However, if you lack financial discipline and feel happier tying up your money, you may benefit from a notice account. Personally, I don't see the point in locking away my cash for up to 180 days just to earn an extra 0.2% a year. You'd have to have a massive savings pot to make this extra 0.2% worthwhile, because it comes to just £6 a year more on £3,000! Alright, you've talked me into it - I'll leave it up to you to decide whether you're happy to put your money in handcuffs for the sake of an extra few quid. Here's one account to consider: Portman BS pays 5.55% on its Bonus Extra Issue 3 75-day account. However, be warned: this includes one of those annoying bonuses – in this case, 0.80% to 15/03/2005, so the AER falls to 5.23% AER. Now do you see what I mean: over a year, you'd be better off with Alliance & Leicester's Online Saver! Children's accounts The taxation of children's savings accounts isn't straightforward, but kids earning less than £200 a year in interest earned from capital given to them by parents shouldn't pay any tax (after completing an R85 form). Learn more here. Sensible parents and other relatives will ignore the freebies and other gimmicks and go straight to the interest rate. Yet again, Alliance & Leicester tops the table: its First Saver account pays 5.50% AER on every pound. Finally, I'm a fan of the Nationwide BS and its Smart2Save account. It pays 5.01% AER, which is good enough for my little boy. So, what are you waiting for? Get to work, and claim your share of that extra £5 billion in interest today! More: Increase your interest rate in our Savings and Cash Mini-ISA centres.