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Make a save on ... your savings

    If you have savings, making them work for you is tougher than ever. Here are the 10 things you need to know right now.

    ● the best easy access account is currently offering only 2% AER

    This sets the benchmark for everything else. But, remember, if the best is this bad, what is yours offering? Check.

    The top paying account is currently from Derbyshire Building Society, with unlimited no-notice withdrawals. This includes a 1.5% year-long introductory bonus, which effectively acts as a rate promise for that time. After that, ditch and switch. See www.moneysavingexpert.com/topsavings.

    ● Earn 3% AER
    (plus cashback) in
    a current account

    Bizarrely, for the best easy access savings, grab a Santander 123 bank account. New and existing customers with £3,000-£20,000 get 3% on the whole amount. There is a fee of £2 a month, though as it also pays a nice 1-3% cashback on bills, that should easily cover it.

    ● put monthly money away

    Regular savings accounts offer hot rates but only let you save a limited amount each month. To save a lump sum, drip-feed it from a top easy access account. The top rates are often linked to bank accounts, so check yours. If not, the top deal is Norwich & Peterborough's 4% AER fixed for 12 months (with a maximum deposit of £250 month). You must pay in every month, and not make more than one withdrawal in the year.

    ● The best savings rates

    Think about it: £1,000 credit card debt at 18% costs £180 a year, but the same in savings, after tax, earns £15 at best. So pay off the debt with the savings and you are £165 up. Pay off credit cards even if you have not got an emergency fund, as if a real emergency came, you could simply borrow back on the card.

    With mortgages, if their interest rate is higher than the after-tax rate on savings, it makes sense to use the savings to overpay them. With rates so low, many are now in this category.

    Yet, 1) Check there are no penalties for overpaying. If there are, it is likely not to be worth it, and 2) Keep enough cash to keep you afloat for three to six months, as unless you have an offset mortgage, you can't borrow back on it once you have repaid it. The benefit of this can be huge. See www.moneysavingexpert.com/overpaycalc.

    ● Earn 8% interest lending money to others

    This can work extremely well, earning some up to 15%. Your money is lent via special sites uk.zopa.com, fundingcircle.com and ratesetter.com. They credit-check borrowers can afford to repay, and chase repayments if they fall behind. Many have earned decent returns, but unlike savings, they have got no government protection. This can be extremely lucrative but it isn't without risks. See www.moneysavingexpert.com/peer2peer.

    ● Make the most of your tax-free cash ISA savings

    If you have not got your 2012/13 cash ISA, there are only two months left.

    The top easy-access deal is Cheshire BS's 2.5%. It also allows you to transfer in past years' cash ISAs. Check yours now, and transfer if needed. This rate includes a 2% bonus for 18 months, effectively acting as a rate promise for that time, but transfer out afterwards.

    If you can wait to access your cash, Coventry Building Society's 60-Day Notice ISA pays 2.8% on balances from £1, guaranteed until December 2013, but doesn't allow transfers.

    ● Your kids can earn 6%

    The branch-based Halifax Kids' Regular Saver pays a huge 6% AER fixed for a year (max £100/month) if you are prepared to lock cash away

    ● Is it worth locking cash away to get 2.25%?

    Right now, the rates are horrid so it is questionable whether fixes, especially longer ones, are worth it. The top payer over one year is currently Virgin Money with 2.25% AER.

    ● Premium bonds for higher-rate taxpayers

    If you are a high-rate taxpayer, think Premium Bonds. I have never been a fan, and the current prize rate is just 1.5%, but, as it is tax-free, that equals 2.5% AER for higher-rate 40% taxpayers.

    To see your chances of winning, try www.moneysavingexpert.com/premiumbondcalculator.

    ● A few final quickies

    a) Unless noted, all the accounts listed have full £85,000 UK savings safety protection. If you have more, spread across multiple accounts. b) If you are a couple, put savings in the lower taxpayer's name. c) If you have kids, as some of their accounts pay higher rates, saving in their name pays. But if they earn more than £100 a year interest from it, it is taxed at your rate.

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