03 Feb Savings Accounts Comparison: Making the Most of our Travel Money
To make the most of our travel savings we’ve always tried to use the best UK savings accounts. Due to the recession, interest rates in the UK have been pretty shocking for the past few years but we’ve still managed to make a bit of extra cash from stashing our money in high interest savings accounts – here’s a guide to what we’ve used in the past and what we’ll use when we start our trip.
Our Savings Accounts Comparison
Firstly, if you’re in the UK, it makes sense to take out an Individual Savings Account (ISA). ISAs don’t charge you tax on the interest you earn; however, you can only save £5,640 each year in cash.You need to shop around for the best ISA savings accounts, as many will only have introductory or variable rates. We looked for ISAs with a fixed interest rate, but not with a fixed term, so our money wouldn’t be locked away until the ISA matures.
High Interest Accounts
If you’re saving more than £5,640 per year, as we were for our travel adventure, you’ll need a savings account in addition to an ISA. Again, the interest rates vary on savings accounts and are typically higher if you go for an account where you’re money is locked in for at least a year and if you choose an account with a fixed rate of interest for a certain period.
Here are the savings accounts we’ve used while saving for travelling:
|Savings account||Interest rate||Conditions||Annual interest|
|HSBC Regular Saver 2011-2012||10%>||You must deposit Between £25 and £250 into the account each month, which cannot be accessed until the account matures. To get the best interest rate you need an Advance Current account, which costs £12.95 per month.||£236 (for our two accounts which each had £2,775 in)|
|HSBC Regular Saver 2012-2013||8%||As above||£208 (for our two accounts which each had £3,000 in)|
|Santander ISA||3.3%||These have yet to mature, but we think we’ll earn around £400 interest on both our ISAs|
As you can see, the best regular saver rate of 10% only lasted a year; after that, if you take off the cost of paying £12.95 per month for the advance account we actually only made about £50 – which wasn’t great. However, the advance account did also give us breakdown cover worth £50 and holiday insurance for a trip to France and our two week holiday in Rome, Italy.
Where will we keep our savings when we travel?
Since our regular saver no longer has a great rate and our ISA rate will plummet after April, we needed to find another account in which to store our money. This savings account needed to:
- Have the best rate of interest possible
- Be accessible over the internet so we can move money from it to our travel debit account online
- Have no fixed term
Having done some research we found the Instant Access savings account with the Post Office, which has the following features:
- 2.10% bonus interest rate for the first 12 months
- Lets you transfer money online
- Lets you save up to £1 million
- Needs to be opened with a minimum of £500
After making some good interest on our HSBC Regular Saver accounts, if we decide to spend time back in the UK or in Australia we will consider using one of these accounts to continue saving for other trips.
Tax-free interest when you’re not earning
I’ve also discovered that if you’re not earning over £8,105 in a year then you don’t have to pay tax on the interest you earn from savings. Given that neither of us will be earning anywhere near that while we travel, we’ve filled in an R85 form from the tax office which exempts us from paying tax on our interest.
Where do you keep your travel savings?