17:02 04 March 2013
Age is but a number when it comes to savings, recent research from MoneySupermarket has found.
From young professionals to retirees, all generations are taking advantage of the financial benefits offered by cash ISAs - a savings wrapper in which the interest you earn won't have tax deducted.
But whatever your age, you need to act quickly if you want to make the most of this tax year's cash ISA allowance of £5,640 as time is running out. The current tax year ends on April 5, 2013 and if you haven't used up your full allowance by then, it will be lost forever as you can't carry it over into the new tax year.
Here, we take a closer look at ISAs through the generations - and throw in a few extra money saving tips to make sure your money really is working as hard as it can for you.
Our MoneySupermarket research showed that, on average, 39% of UK adults have already saved or are planning to save into a cash ISA before the end of the current tax year.
But it's savvy retirees that have come out top of the class, with an impressive 43% saying they have already saved or are planning to save into a cash ISA this year. This is also the group that looks set to save the most, putting away £3,901 on average this year.
Top money saving tip for retirees!
It's not only your ISA that will help you to make savings. If you are aged 60 or over and regularly travel by train, it's worth investing in a senior rail card at the cost of £28 a year. You'll then be able to enjoy a third off train fares across Britain.
Working families with children are the next most likely group to save. On average, families plan to put away £2,750, but their ability to save is partly dictated by how many people in the household bring in an income.
Almost half (48%) of families with both parents out at work are able to save into a cash ISA, but in comparison, only 21% of families with one adult working have spare cash to squirrel away.
On top of this, the research revealed that 45% of people who have held a cash ISA in the last five years have withdrawn money from it. The most common reason (26%) for withdrawing money from these savings was to cover household bills.
Top money saving tip for families!
Withdrawing money from your cash ISA means it will lose its tax-free status and, if you've already used up your full allowance, you won't be able to top your ISA back up in the same tax year.
It therefore makes good financial sense to open a separate easy access savings account that you can dip into in emergencies. But when choosing your account, watch out for those that limit the number of penalty-free withdrawals you can make each year.
Young working professionals
Bringing up the rear are young working professionals, of which almost four in 10 (38%) indicated they will be saving into a cash ISA this tax year and plan to put away an average of £2,838.
Top money saving tip for professionals!
Making the most of your tax-free allowance while you're young is the ideal way to build up a significant savings pot. In fact, had you invested fully in ISAs since 1999, research by independent financial adviser, Hargreaves Lansdown shows you would have sheltered a whopping £112,560 from the taxman.
However, it's also the perfect time to starting thinking about your retirement and investing in a pension. Doing so will allow you to benefit from tax relief. For example, if you're a basic rate (20%) taxpayer, for every £80 you pay into your pension, the government will top it up to £100.
The earlier you start to contribute to your pension, the more you will benefit from this tax relief and the more you'll have to live off in retirement.
Saving into a pension is becoming even easier thanks to auto-enrolment. The scheme, which is being gradually rolled out across the country, means that all employees must be automatically enrolled into a pension scheme by 2017.
Even though savers are currently getting a raw deal thanks to low interest rates, the research shows that no matter what age group they fall into, people are still actively saving into cash ISAs.
Kevin Mountford, head of banking at MoneySupermarket said: "It is encouraging to see so many people taking advantage of the tax free benefits of saving into an ISA. Unsurprisingly, it is those who are retired who are putting the most away, but it is encouraging to see so many young professionals getting into the savings habit.
"While not everyone can afford to put away the maximum tax free allowance of £5,640, taxpayers should try to use as much of their ISA allowance as they can to make sure that the interest they earn on their hard-earned savings is not unnecessarily lost to taxation."
Those looking for an easy access cash ISA can currently earn an annual interest rate of 2.50% with Cheshire Building Society, providing they have a minimum deposit of £1,000. The rate includes a 2.00% bonus until July 31, 2014 and can only be operated by post.
Alternatively, if you are a Barclays customer, you can take advantage of its Loyalty Reward ISA paying 2.28%, with a 12-month bonus of 0.25%. You can open the account with £1.
If you're happy to leave your money untouched for two years, the Halifax ISA Saver Fixed pays 2.50% if you have £500 or more to invest. Or, for three years, the BM Savings Fixed Rate ISA pays 2.80% on deposits of £500 or more.
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