FOOL'S EYE VIEW
Top Places To Stash Your Cash!

By Alison Hunt (TMFAlly)
March 29, 2005

There's just a week to go before 6 April, which is the start of the 2005/06 financial year.

How are your finances? Do you have a cash cushion or rainy-day fund set aside? A rainy-day fund usually consists of between three and six months' income. Some people prefer to set aside much more than this to see them through unforeseen problems and prevent them from having to borrow. Having a cash cushion is a great way to give yourself peace of mind. After all, knowing that you'd be financially safe for a while if anything happened should help you to get a better night's sleep. And if you pick the right place to stash your cash, it can grow happily all by itself!

If you don't already have a rainy day fund, you should certainly be thinking about starting one – after all, wouldn't it be nice to have a cash cushion to dip into when the boiler packs up, or the car needs some repairs?

And those of you Foolish enough to have a rainy-day fund already – how much interest are you earning? Are your savings stashed in market-leading accounts? Or did you open a high-paying account years ago that now lags far behind the rest? Why not take a look at your savings, because if your account is paying a measly rate of interest, it's time to move your cash to a worthier provider?

1. Cash mini-ISAs

Your first priority should be to open a cash mini-ISA. If you're very quick, there's still time to use your 2004/05 allowance (if you haven't already done so). You'll need to open an account before next midnight on Tuesday, 6 April.

Cash ISAs allow you to invest up to £3,000 each tax year and earn tax-free interest on these savings. In addition, those with cash ISAs may also invest up to £3,000 in a shares mini-ISA (this shares limit increases to £4,000 in the next tax year), so you won't miss out on the investment side of things.

Don't underestimate the importance of the 'tax-free' bit if you're a taxpayer. A cash ISA paying 5% actually pays you 5% in interest. A savings account paying 5% only pays you 4% if you're a basic-rate taxpayer, or a measly 3% if you pay higher-rate tax! And cash ISAs may be worthwhile for non-taxpayers, too, if they aren't sure whether they may need to pay income tax in the future.

Current Best Buy no-notice cash mini-ISA accounts

Provider	Account name	Minimum deposit	Interest rate (AER)	Interest payable
Alliance & Leicester	Direct ISA	£1	5.40%	Yearly
Abbey	Postal ISA	£1	5.35%	Yearly
First Direct	e-ISA*	£1	5.34%	Monthly
Yorkshire BS Apply via the Fool	e-ISA	£10	5.20%	Yearly
Halifax/Bank of Scotland	ISA Saver Direct	£1	5.15%	Yearly

Source: Moneyfacts

*includes introductory bonus.

Don't forget: if you're considering moving an existing cash ISA to one of these Best Buys, you need to transfer it. Don't close your existing account and open a new one, or you'll lose your tax-free status!

Find out more or open an account in our ISA Centre.  

2. Savings accounts

If you've used up your annual cash ISA allowance (you get a new one next Wednesday), you'll need a savings account that pays a great rate. There are a number of good accounts out there at the moment:  

Current Best Buy easy-access savings accounts

Provider	Account name	Payable on	Interest rate (AER)	Interest payable
Alliance and Leicester Apply via the Fool	Online Saver	£1-£25k	5.35%	Yearly
AA	Internet Savings	£1-£5m	5.31%	Anniversary
Birmingham Midshires Apply via the Fool	Internet easy access	£1-£5m	5.25%	Anniversary
First Direct	e-Saver	£1-£250k	5.20%	Monthly
Cahoot Apply via the Fool	Savings	£1-£249,999	5.10%	Monthly

Source: Moneyfacts

Don't forget: if your partner is a non-taxpayer (and you trust him/her!), putting your savings in his/her name would mean that you could pay less tax - or even no tax - on this interest, too!  

Find out more or open an account in our Savings Centre.

3. Regular-savings accounts

If you find it hard to save each month and need some motivation, regular-savings accounts could help. These accounts require regular sums to be paid in each month (usually between £10 and £250) for a set number of months. If you fail to make a monthly payment, or make more withdrawals than the limits allow, you usually forfeit a very good interest rate, earn the bog-standard rate instead, and may even have to pay a penalty.  

This method of saving can be a useful motivational tool to encourage you to save regularly and to stop you from withdrawing your money before your savings period is up. However, as savings are usually swept into an unattractive account when the initial period ends, you should be prepared to move them quickly.

Current Best Buy regular-savings accounts

Provider	Account name	Payable on	Interest rate (AER)	No. of payments	Interest payable
HSBC	Regular Saver*	£25-£3k	8%	12	On maturity
Coventry BS Apply via the Fool	Family 1st**	£1-£500k	7.25%	10	Monthly/Anniversary
Halifax/Bank of Scotland	Regular Saver	£25-£3k	7%	12	On maturity
Yorkshire BS	Monthly Saver	£10-£3,600	5.85%	12	Anniversary
Derbyshire BS	Regular Savings	£10-£1m	5.85%	12	Yearly

Source: Moneyfacts

*Applicants must have an HSBC current account into which their salary or main income is payable. 
**On Child Benefit payments; other money earns 5.25% AER.

Note that you must have an HSBC current account to take advantage of its current Best Buy savings account. In addition, the Coventry Building Society account is only available to families, as it requires the direct payment of Child Benefit into the account by the Inland Revenue.

You can find out more or open an account in our Savings Centre.

So, take a look at your savings accounts. If the interest rate that you're earning is less than those paid by these Best Buy accounts, don't suffer in silence. Instead, move your money! Use our savings calculator to find out how much interest you're missing out on – you may be shocked!

Find out more or open an account in our Savings Centre.