TISA - Tax Incentivised Savings Association - Guides To Saving Schemes

Guide to Savings

Saving why its important 
Saving money, either as occasional lump sums or regular amounts, is very important. It can help in a number of ways such as:

  • Having a sum of money available for emergencies such as car or boiler repairs or if you experience a sudden drop in, or loss of income
  • Helping you afford holidays or other 'treats'
  • Having enough money to live comfortably in later life
  • Paying off the mortgage
  • Helping your children through college or university
  • Leaving some money when you die for people who depend on you 
When thinking about saving, you should always consider paying off unsecured debts first, especially those with high interest rates.

Short to medium-term saving 
You should have Rainy day savings readily available to you for unexpected expenditure, such as the emergencies mentioned above.  Cash savings accounts are often used for this type of saving as you can get money out quickly and there is virtually no risk that money invested in a cash savings account will be lost. There are many types of cash savings accounts available including cash Individual Savings Accounts (ISAs) that offer a higher rate of interest than other types of cash accounts.

Long-term savings 
When saving for the longer term, you should consider investing in something other than a cash account. There are many ways of saving for the long term and whilst nothing is guaranteed, evidence suggests that investing in the stock market provides a better long-term return than savings held in cash. This form of saving is suitable for money that you are unlikely to need at short notice.

So, how can you save for the long term? Some money could be put into investments in a stocks and shares ISA. This type of account allows you to withdraw money if you need it, although it is best viewed as a long-term investment. You could also save in an account where access to the money is restricted to a certain time or event. For example, saving for your child in a Child Trust Fund (CTF) which they can access on reaching 18 or saving for your retirement in a pension. You could save in a single premium investment bond which enables you to withdraw 5% of your investment each year without incurring any tax liability. Another option is to invest in property - either directly or through funds which invest in property. However, you should bear in mind that the value of property - like other long-term investments - can go down as well as up and there is a risk you may not get all your investment back.