10 ways to protect your savings

After a slump in the economy which has seen many major banks collapse, thousands of savers are concerned about their money. Here are 10 ways to protect your savings:

1.  Don´t panic

Remember that the UK Government bailed out the banks to the tune of £37 billion, which should prevent any more banks collapsing. If a UK bank or building society was to fail, the Financial Services Compensation Scheme (FSCS) will protect saver´s money up to a limit of £50,000.

2. Don´t put all your eggs in one basket

 If you have savings of over £50,000 it would be a good idea to split the money into different accounts. This way you will be safeguarded if any one particular bank goes bust.
 
 3. Who owns what?

Compensation of £50,000 is paid per banking licence, and not for each account, so before you start spreading your savings between accounts, contact the Financial Services Authority on 0845 6061234 or check out www.fsa.gov.uk to safeguard your money.

4. Beware foreign banks
 
Be very wary of investing in foreign banks. Major banks, including Icesave in Iceland, went bust recently, and although savers were assured of compensation when they opened accounts, in the event of any collapse, these claims have since proved hollow. The Icelandic compensation scheme was underfunded and the UK Government was forced to guarantee UK deposits in the stricken bank.
 
5. Switch banks for better deals

Many savers stick with the same bank for years, and misguided loyalty can mean they miss out on some great deals elsewhere. Compare bank deals for new customers, and if your mortgage deal is due to come to an end, see if you can save money by switching your account. You can also fill in a form at your new bank which will switch all your current standing orders and direct debits to your new account.

6. Emergency funds
 
It is advisable to have at least three times your monthly salary saved in a separate account for emergencies, and never adopt the ´it won´t happen to me´ attitude. Recent recession has seen a massive increase in redundancies and unemployment, and if you don´t have any money to fall back on you could end up with serious debt problems. If you are able to rely on savings, you can save the interest charges and added expense of using credit cards and applying for loans.

7.  Never ignore inflation

If the value of your savings cannot keep up with rising prices your buying power will be eroded. It may be worth your while considering index-linked savings certificates which pay a set amount above the retail prices index. Three and five year certificates pay the equivalent of 10% on a taxed account, assuming you are in a higher-rate bracket. Bear in mind, however, that if inflation falls, the certificates won´t look such a good deal.

8.  Beware short-term bonuses

Many savings schemes offer to pay short-term bonuses, which will lift them into the ´best-buy´ tables, and then lower their interest rates later. Check the terms and conditions of any savings scheme you may be considering, and ask as many questions as you need to before signing on the dotted line.

9. Watch out for restrictions

Many easy access accounts restrict the number of withdrawals a saver can make and some also charge a penalty for withdrawals. Check if there are any penalties before you open an easy access account, and shop around to find a better deal if you are not satisfied.

10.  Shop around for a current account

If your balance is normally in credit, shop around for a current account which doesn´t charge fees and which consistently pays a higher rate of interest. There are hundreds of current accounts out there, and you should make sure you get the best deal available.