With savings account interest rates remaining low, growing your savings today can seem challenging. However, there are definitely things you can do to get your money working harder for you. Below, I look at three simple things I’m doing right now to boost my savings.
For my day-to-day bank account, I use a Santander 123 account. I also use this account as my ‘emergency fund’ meaning I keep enough money in it to cover around three months of expenses.
The advantage of this account is that it pays interest of 1.5% p.a on balances up to £20,000. So, that means I’m regularly picking up interest on my money that is sitting there for day-to-day use and for emergency savings.
Additionally, the Santander 123 account also provides cash back of between 1% and 3% on household bills paid by direct debit, which means I receive a little bit of extra money in my pocket every month just for paying my regular expenses such as gas, electricity and mobile phone.
Stocks and Shares ISA
Next, I have a Stocks and Shares ISA set up and in this account, I own a portfolio of dividend stocks. These are stocks that give me cash payments on a regular basis. For example, some of the stocks I own include Royal Dutch Shell, Lloyds Bank, Legal & General Group, and Unilever – which all pay their shareholders generous cash dividends.
The beauty of this strategy is that I receive cash payments throughout the year from my dividend stocks for doing absolutely nothing. The dividend yields on the stocks I own are also far higher than the interest rates available on cash savings accounts right now. For example, Lloyds currently has a yield of around 5.5%, which is over three-and-a-half times the best savings account rate. Moreover, all this dividend income is tax-free because the stocks are held within an ISA, and I can access it whenever I want because this ISA is extremely flexible.
Finally, I’m also putting money away for retirement in a Lifetime ISA. I won’t be able to touch this money until I’m 60, but I’m fine with that.
The reason I’m putting money into a Lifetime ISA is that for every pound I put in up to £4,000 per year before age 50, the government will throw in an extra 25p. So, if I put in £4,000 this year which I plan to do, I’ll receive a bonus of £1,000 from the government. That’s no doubt an attractive proposition in the current financial environment. Since I opened my Lifetime ISA early last year, my money has really grown quickly due to the generous top-ups from the government.
So, as you can see, there are plenty of ways in which you can boost your savings right now. The key is to look outside regular savings accounts and be open to different wealth-building ideas.
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Edward Sheldon owns shares in Royal Dutch Shell, Unilever, Legal & General Group, and Lloyds Banking Group. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.