Having been introduced more than a decade ago, the individual savings account – more commonly known as the ISA – has become a popular way for people to save for the future.

Whether you have a specific savings target in mind, or are just putting together a rainy day fund, the tax efficiency an ISA can provide makes them a great option. In fact, they are already something that has very much crossed over into the mainstream.

Brought to the market to replace schemes like personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs), ISAs have clearly been taken to heart by the general public, as there are so many now in place. By the end of 2009 alone, it was estimated that there were well over 19 million ISA accounts that had been set up across the UK.

There are, however, still some common misconceptions about how Cash ISAs work. One of these is that they are only suitable for those looking at longer term investment. While it is true that there can be greater value in keeping your cash locked away for longer in an ISA, they are also a solid option if you have a shorter term savings goal. If you choose a fixed rate Cash ISA, for example, you can get a pretty accurate idea of what you might have available when it’s term ends.

Once you’ve chosen between a fixed and variable rate, and are happy with the rate you’ve been offered you will be able to save up to a specific amount over the course of any one tax year. In 2010/11, this allowance was raised to £5,100, but the Government has since suggested this may increase year on year in line with the Retail Price Index. But the most notable thing about ISAs is the fact that you will not have to pay any tax on the interest you earn – making them significantly more attractive to some than a standard savings account.

The best way to make the most of your Cash ISA is to invest one lump sum as early as possible in the tax year, as this will mean you can start generating the maximum amount of tax-free interest sooner rather than later. However, you can also make any number of smaller payments up to the yearly limit. Once you’ve paid in up to this limit, you won’t be able to replace any money you withdraw, but as you can pay into it in a way that suits you, you should find it is flexible enough to meet your needs.

Following their introduction across the UK over a decade ago, individual savings accounts – which are more commonly known as ISAs – have proven to be a popular choice for British savers looking to make the most of their money.

The tax efficient option was brought to the market to replace other schemes like personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) and it seems that they have been taken to the heart of the general public since then. In fact, it is estimated that by the end of 2009 there were now well over 19 million ISA accounts in operation across the nation.

It could well be argued then, that the product is something that has now well and truly crossed over into the mainstream. But there are still some common misconceptions about how they work. Whether it is a variable or fixed rate ISA you opt for, it should be noted that the flexibility of the product means it is ideal for both long and short-term investment.

There are plenty of money saving tips you will find online, alongside various articles about how you might be able to secure the best ISA rate. But before you get to that stage you may first want to find out a little more about how the product works. Initially, you will be faced with two types of ISA from which to choose. A cash ISA effectively works as a high interest savings account that provides the benefits of being tax-free, but a stocks and shares ISA operates quite differently. Here, users will utilise investments, properties or bonds that can be picked by your provider on your behalf to hopefully create a return on your investment.

Another reason that you may want to consider opening an ISA is that from April this year, the amount you can put into an ISA was raised from £7,200 to £10,200. This new allowance was introduced by former chancellor Alistair Darling, who said the plan was to build on the success of the product. “I’m determined to help savers, because while low interest rates have helped millions of homeowners, I also know that they have hit those who rely on their savings to get by. This is why I am increasing the ISA allowance for all over-50s by £3,000 to £10,200 and from April next year for all savers,” he explained.

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As ISAs have been around now for more than a decade, it’s pretty clear they have proven themselves as something of a mainstream product that is popular with many.

Having been brought in to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs), ISAs are now enjoyed by millions looking to make the most of tax-free savings. However, ISAs have gone through a few more changes in 2010 that make them even more appealing.

There are now more than 19 million ISA accounts that have been set up by savvy Brits, but with a wide range of ISA types to choose one, selecting one that is right for you might mean you have to take a good look at how they differ slightly from one another. Firstly, you will want to think about whether it is a fixed rate ISA that works best for your plans or if you’d be happier with a variable rate. If you go for a fixed rate, you’ll be able to more accurately project what kind of return to expect when the term of the product comes to an end. A variable rate, on the other hand, will track the national rate of interest and change in line with this.

However, there are some other common misconceptions that exist about ISAs you should be aware of – one of which is that they are suited only to long-term investment. Of course, your ISA can perform better if you can lock away your savings for longer, but if you have a shorter-term savings plan or target, you could still find they are just what you need. It’s also worth noting that when you are looking for the best ISA rate, you’ll see differences in the way they can potentially generate a return on your cash. Cash ISAs operate by offering you high interest savings over a particular term, with interest remaining tax-free along the way. Stocks and shares ISAs, on the other hand, make use of an investment package that might include properties and bonds – all of which are selected in advance by you or your provider.

No matter which ISA option you choose though, you’ll need to adhere to specific limitations on how much you can put into them over the course of any one tax year. However, 2010 saw this allowance revised by the government, so that from April 6th 2010, all eligible savers can now save up to £5,100 in their cash ISA or up to £10,200 in a stocks and shares ISA (less anything you have already put into a cash option).