High interest savings accounts can be an important investment vehicle that can help you grow your nest egg and work your way to a healthy retirement. Although savings accounts often too good to be true, the reality is that many of them are really not even worth it. If you look at normal savings accounts with a nominal interest rate of 3.5 to 5% it might sound okay, but when you look at all the fees, interest and inflation yo might actually be losing money.

Saving money is important and saving it at the maximum interest rate is really important – especially over long periods of time. Even 0.5% can make a huge difference over a 30 year period. Choosing the right savings account requires a bit more research and making sure that you get put your money in a savings account where your money will work for you is critically important. Here are 3 dangerous things you need to look out for.

1. Penalty Fees

One of the biggest things you need to look out for is penalty fees. With high interest savings accounts there are usually a fixed term where you cannot withdraw your capital. When you do, they penalize you and this can either be a withdrawal fee or a rate penalty or both.

2. Hidden Charges

No matter which bank you are with and no matter how many promises they make, there is always fees and charges. Its normal as they are providing a service and the fee is their payment for the service. The problem is if you are not fully aware of all the charges and you think you are getting more interest than you are actually getting.

3. Variable Rates

Often times banks will lure you in with a very attractive rate only to have a small print clause that the rate only applies for the first 6 months and that you are obliged to commit to a 5 year term. Make sure you read the terms of the investment very closely and make sure that the rate really is a high rate.

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If you are one of the many people that make regular payments into a savings facility, you may be well placed to recommend others do the same having seen what it can do for your financial stability.

Whether it’s for a specific purchase or part of a backup plan for unexpected expenses, you might also find that as the economic slowdown becomes a thing of the past, your safety net puts you in a stronger position for the future. In fact, with more money available to spend on a new car, a deposit for a house or some other big ticket purchase or outlay, savers who have continued to be careful with their cash could be doing the country a big favour further down the line.

A study conducted in January this year highlighted the fact that, despite recent economic difficulties, people are still putting their faith in having an effective <a rel=”nofollow” onclick=”javascript:_gaq.push(['_trackPageview', '/outgoing/article_exit_link']);” href=”http://www.halifax.co.uk/savings/savingshome.asp”>savings account</a>. Conducted by YouGov, the research seemed to suggest consumers had not let the recession impact their savings and in fact, numbers were looking much more positive than they were 12 months beforehand. It was revealed December 2009 saw the average UK saver put around 136% more into their nest egg than in the same month the previous year. This worked out at approximately £776 being put away by these people during the final quarter of the year – a significant increase on the £329 being saved the year before. However, 38% of people admitted they had dipped into their stash on at least one occasion – but the average amount involved in this moment of weakness was also much lower than it had been in the past.

But it is not just traditional savings accounts where people are finding a way to make their funds work harder for them – and as the new tax year arrives, more savvy savers might find themselves looking for the best cash ISA option for their money. From April 2010, the amount that can be held over a 12-month period in such a facility has been upped for all holders to £5,100 from the previous £3,100 figure.

This all means that there is now more chances than ever to make tax efficient savings for those who want to try and make the most of their funds. In addition, these changes extend to stocks and shares options, with an allowance of £10,200 now available to put into such a product, provided the holder has not put anything into a the latter type of ISA.

An ISA (Individual Savings Account) is a great investment vehicle that you need to take full advantage of. We all know just how important it is to save money and to invest for the future, but for most it seems like a distant dream – buried under credit card debt.

Saving money is more than just a wise thing to do with your money. Its necessary and many people face a bleak retirement. Saving for your retirement is something you need to start as soon as possible and using an ISA is a great way to do it. One of the main benefits of an ISA is that its a tax free investment. You don’t even need to declare the investment (to the maximum allotted amount) to the IRS.

Although there is a limit on the amount you can save in your ISA, if you do it every year it can quickly add up. For many people, having an ISA and knowing that they can save tax free often encourages them to save the full amount. If you are someone who is struggling with getting yourself to save every month, then just having an individual savings account can be encouragement enough.

ISA’s also allow you to invest in stocks. Even after the global financial crises, the stock market is still the best investment vehicle with the highest returns on average. ISA’s are designed to encourage you to invest in the stock market and you can invest your entire ISA limit in stocks and shares. Most mutual fund providers will allow you to invest in their stock portfolios which can be an easy way to invest in the stock market with minimal effort and maximum savings as this too will be exempt from tax.

The sooner you start using your ISA the better. By making the full saving every year, it soon adds up and before you know it you can build a really nice nest egg.

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