Reasons to choose an ISA
There are many reasons why people choose Individual Savings Accounts (ISAs) to save money for the future, including the high capacities of these accounts and the high earning potential they offer. There are also different types of ISAs available to suit different customers' personalities and saving styles.
With a stocks and shares ISA, you can save up to 11,280 per year (2012/13 tax year), and all interest gained on your savings will be entirely tax-free. So, you won't have to worry about your hard-earned savings being lost to the taxman. Cash ISAs have a smaller capacity of 5,640, but savings can be effectively split between the two types of accounts for the maximum interest potential. However, it should be noted that customers may only open one cash ISA and stocks and shares ISA each year.
If you're new to savings, or you're investigating ISAs for the first time, cash ISAs are the simpler option, and are very easy to get to grips with. As their name suggests, these are savings accounts into which money can be added according to your preference - on a regular basis or as a one-time deposit. Cash ISAs can be a great way for you can sit back and watch your savings grow.
Stocks and shares ISAs require more attention and financial skill, as these savings are based on picking funds from available selections that look like they will deliver the highest returns over time. If you've never dealt with shares and funds before, you can obtain financial advice from your ISA provider or from an independent expert. However, this type of ISA does carry some degree of risk with its higher earning potential.
It's important to read the terms and conditions of each ISA product before opening an account, as there may be certain restrictions or stipulations that do not meet your needs, such as minimum balances. Some ISAs offer easy access to funds, which can be desirable if you think you wish to make frequent withdrawals. However, others can penalise account holders with charges or significant interest deductions if withdrawals are made before the 12 month period is over.
Some ISAs that offer especially high interest rates may also only be available for a single year, rather than for an on-going period of time. These can be more lucrative for short-term savers, but may not be ideal for people who are looking for a longer term solution for interest free savings. Comparing interest rates is one of the most important aspects of evaluating different ISA products.
With a stocks and shares ISA, you can save up to 11,280 per year (2012/13 tax year), and all interest gained on your savings will be entirely tax-free. So, you won't have to worry about your hard-earned savings being lost to the taxman. Cash ISAs have a smaller capacity of 5,640, but savings can be effectively split between the two types of accounts for the maximum interest potential. However, it should be noted that customers may only open one cash ISA and stocks and shares ISA each year.
If you're new to savings, or you're investigating ISAs for the first time, cash ISAs are the simpler option, and are very easy to get to grips with. As their name suggests, these are savings accounts into which money can be added according to your preference - on a regular basis or as a one-time deposit. Cash ISAs can be a great way for you can sit back and watch your savings grow.
Stocks and shares ISAs require more attention and financial skill, as these savings are based on picking funds from available selections that look like they will deliver the highest returns over time. If you've never dealt with shares and funds before, you can obtain financial advice from your ISA provider or from an independent expert. However, this type of ISA does carry some degree of risk with its higher earning potential.
It's important to read the terms and conditions of each ISA product before opening an account, as there may be certain restrictions or stipulations that do not meet your needs, such as minimum balances. Some ISAs offer easy access to funds, which can be desirable if you think you wish to make frequent withdrawals. However, others can penalise account holders with charges or significant interest deductions if withdrawals are made before the 12 month period is over.
Some ISAs that offer especially high interest rates may also only be available for a single year, rather than for an on-going period of time. These can be more lucrative for short-term savers, but may not be ideal for people who are looking for a longer term solution for interest free savings. Comparing interest rates is one of the most important aspects of evaluating different ISA products.
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