Why ISAs are good for saving over the medium or long term
Ready to venture into more serious saving? Read on...
08:50 28 January 2014
ISA or Individual Saving Account (ISA) is a kind of savings account intended for individuals who are now ready to venture into more serious saving. We say this because ISAs generally requires a bigger initial deposit compared to an ordinary savings account. The opening deposit may vary from £1,000 and up, depending on the bank’s policy. Monthly contributions of £50 or more are also usually compulsory.
One of the major benefits of ISA is it gives out a better yield than the ordinary savings account so that you can expect your money to grow faster without being tied up for a long period of time. This means you can access your savings in case of emergencies. However, some kinds ISAs are not entirely risk-free. Investment ISA, for one could be wiped partially or entirely in the event that your investment does not perform well. However, the probability that you will recover from the losses over a period of time is good, unless you decide to remove your savings before the investment starts to pick up. Generally, it would be better to go with the long-term investment ISA which performs much better than a basic savings account offering variable interest rates.
The ISA’s other unique advantage is its being tax-free. This means that the interest earned from the savings will not be taxed when you pull out your money. This is something all investors or savers would really want to – to be able to totally enjoy the earnings of their investments. This works very well for individuals who are saving for their retirement and supplemental funds or inheritance planning.
Before you look at your investment options you have to determine your financial objectives. Determine if the money you are saving is for retirement or for a big purchase sometime in the future. Knowing where you plan to use your saved up money will help you choose a suitable savings or investment option - a standard savings account or going for a longer term ISA.