WITH inflation falling and the economy starting to get back on its feet many of us are looking at making the most of our cash.
Interest rates might still change which means standard bank savings account offers are not always reliable.
The Lifetime Isa (LISA) is a savings product which is designed to help people save for a first home or retirement.
The account is tax-free and anyone between the ages of 18 and 39 can open one.
You can save up to £4,000 a year and the government will then add a 25% bonus on top, effectively giving you free money.
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But with current deals on the market, you can boost this even more and get as much as £8,000 in your bank without lifting a finger.
Alice Haine, personal finance analyst at Bestinvest, the online investment platform says: “LISAs work best for younger savers looking to save a deposit to purchase their first home as the government top-up can help the money build much faster.
“So, over a five-year period a saver that contributes the maximum £4,000 a year could potentially secure an extra £8,000 over five years with the best cash LISA savings rate provided they could continue to secure the top deal.”
Although she did point out that the rules are complicated and there is a hefty penalty if people want to access their money early.
"But it can turbocharge savings as it comes with a generous 25% government bonus, which equates to up to £1,000 on the maximum contribution of £4,000," she said.
Over a five-year period, a saver that contributes the maximum £4,000 a year could potentially secure an extra £8,000 over five years with the best cash LISA savings rate.
That's made up of the £5,000 in Government bonus plus around £3,000 in compound interest.
Of course, this deal could change so your savings could vary.
If you opt for a cash LISA, you'll want to shop around to get the best interest rate you can find.
You aren't tied to one provider, so once you've opened a LISA you should keep an eye out for other deals and move your savings if you spot a better rate.
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LISA PITFALLS
Alice did warn that there are some caveats to having a Lifetime ISA.
She explains: "The LISA allowance has remained frozen at £4,000 since the product was first launched in 2017, which is restrictive.
"So, savers trying to build up a deposit and able to save more than the maximum LISA allowance of £4,000 may want to consider a regular ISA as well."
It's important to consider your own personal finances before deciding to open a savings account.
You will need to consider how much you are able to save and for how long
Alastair Douglas, CEO of TotallyMoney comments: “A personal finance app might be a good option, as it could give you insights into how you’re managing your money, if your 0% interest-free offer has ended, or if there are cheaper options available to you.”
Alistair explains before thinking about savings accounts it's good to pay off any debt or outstanding interest.
He said: “Once you’ve done that, then work out how much you think you could comfortably save each month.
"Do some research on whether you’d be best off putting your money in an easy-access savings account, or if you’re saving for your first home or retirement, then an ISA might be the best option for you.
“You can currently get up to 5.02% on the best in the market easy access savings account — which is considerably higher than the inflation rate of 2.3% and means your deposits will make you money.”
How can I find the best savings rates?
If you are trying to find the best savings rate there are websites you can use that can show you the best rates available.
Doing some research on websites such as MoneyFacts and price comparison sites including Compare the Market and Go Compare will quickly show you what's out there.
These websites let you tailor your searches to an account type that suits you.
There are three types of savings accounts fixed, easy access, and regular savers.
A fixed-rate savings account offers some of the highest interest rates but comes at the cost of being unable to withdraw your cash within the agreed term.
This means that your money is locked in, so even if interest rates increase you are unable to move your money and switch to a better account.
Some providers give the option to withdraw but it comes with a hefty fee.
An easy-access account does what it says on the tin and usually allow unlimited cash withdrawals.
These accounts do tend to come with lower returns but are a good option if you want the freedom to move your money without being charged a penalty fee.
Lastly is a regular saver account, these accounts generate decent returns but only on the basis that you pay a set amount in each month.
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