How Far Can Your Savings Go These Days?

With savings rates at an all-time low and the rising costs of fuel and food, being able to put money aside has become more challenging. The government and financial experts all assure us we need to ride out the storm together, but when interest rates are falling and there is no real incentive to save anymore, a lot of people are struggling to see the real benefit of investment in such difficult economic times.

With price comparison websites revealing that there are more people than ever taking out payday loans, this does not provide much in the way of positive thinking. These loans are a great way of helping people out of all those difficult financial times when payday is a few weeks away. Although this increase may lead to the belief more people are struggling to get by each month, there may also be another story going on behind the scenes.

Taking out ISAs with a fixed term agreement will mean savers get higher interest rates and therefore a better return on their money. Although this may seem like a straightforward saving account, the reason it is fixed means the saver is under a certain obligation to keep their money invested with the bank for a certain period of time. This could be anything from two years to upwards of 10 years. The more chance of the money being invested for longer, the likelier the saver will be rewarded with a higher interest rate.

Although this may seem too good to be true in these tough economic times, it really is just that. We all know how terrible it is to open your phone bill and realise you have overspent by £50 that month, or the electricity tariff has gone up yet again meaning you need to fork out for the extra cash. What happens if the car needs new tyres or the children require new school shoes? This is usually the point where you would reach into your rainy day fund and use your savings, isn't it? Well, not if you have already made an agreement with your bank to keep the money invested for a certain period of time.

With a fixed rated ISA, though, this is very counterproductive and completely goes against the very essence of the account. By dipping into your money here and there you may incur hefty fees from your bank and could even end up losing out on the interest that has accumulated. Instant access ISA options may well allow you to access your cash whenever you need it, but that more flexible approach is also reflected in the lower interest rate.

Instead of using your savings that are tied up in a fixed rate ISA, it makes more sense to take out a payday loan for any unexpected emergencies that occur. As long as you pay it back as soon as you get paid and do not borrow more than you can afford, you should not incur too hefty a fee. This should only ever be used as a last resort, though, and you should try to avoid relying on it every single month in the weeks or days leading up to payday. If you do decide to use it from time to time instead of tipping into your savings, the cash ISA will still be secure, with the high interest still being paid on top of your savings.

These loans do provide some benefits to a lot of people as the cash is available very quickly, and even those with poor credit ratings can apply. Although it can be useful, it should not be regarded as a recurring way of getting additional finance though as the interest paid back each month will cancel out any interest you may be making on your ISA. If your financial situation is not as secure as it used to be, it may even be more worthwhile moving your fixed rate ISA to a more accessible instant access account where you will be able to stay in control when any unexpected bills do pop up.