Silly Savings Mistake Could Cost You £180, Expert Warns
Renowned money-saving expert Martin Lewis has issued a warning to individuals with savings accounts, highlighting a common mistake that could cost them a significant sum of money. Lewis, 51, shared valuable advice on his website, offering guidance on choosing the right savings account and potentially saving hundreds of pounds in the process.
Navigating the world of savings accounts can be confusing, especially for those unfamiliar with the different types available. Lewis’s comprehensive guide focuses primarily on the top-pick standard savings accounts, but he emphasizes that there are other methods to maximize returns.
One of his key recommendations is prioritizing the repayment of debts, such as credit card balances or mortgages, before focusing on savings. Lewis explains that the interest accrued on debts often outweighs the interest earned through savings. For instance, £1,000 in top savings might earn up to £20 a year, while a £1,000 credit card debt with an APR of 18 percent could cost £180 annually. By clearing the debt with savings, individuals can potentially save £160 or more.
Lewis also draws attention to the benefits of overpaying on mortgages, particularly given the current trend of interest rate hikes. This strategy can significantly reduce the debt associated with homeownership, ultimately leading to mortgage-free status at an earlier stage. Additionally, the money saved on interest through overpayments often surpasses the returns generated by savings accounts. Lewis claims that the gains from overpaying mortgages can amount to tens of thousands of pounds.
Within his guide, Lewis also advises individuals who require instant access to their funds to opt for easy-access savings accounts. Although these accounts allow for withdrawals at any time, they generally offer lower interest rates compared to other types of accounts. Keeping an eye out for introductory bonus rates is also recommended, as they often provide attractive interest rates for a limited period. However, it is crucial to remember the end date for the bonus and switch accounts promptly to avoid languishing on a low-interest rate.
In addition to these suggestions, Lewis presents three additional boosts that offer higher interest rates while still providing some access to cash if required. These include fixed cash ISAs, which allow emergency access to funds, notice accounts for individuals who know when they will need to withdraw money (e.g., those saving for a home), and short-term fixed accounts for individuals with a specific timeframe in mind (e.g., six or nine months).
Lewis’s latest warning follows his recent caution against keeping Cash ISAs open for more than six months, as it could result in individuals losing thousands of pounds. With his expert insights, Lewis continues to empower individuals to make informed financial decisions and maximize their savings effectively.
