Big ticket items like family holidays, home improvements and special occasions can be fun to plan for – especially if you know your money is in a cash ISA, ready and waiting. It means you can concentrate on getting those all important details right, rather than worrying about any unpleasant bills later on.
The secret to enjoying spending money on major developments is to work out a budget and forward plan. Cash ISAs can be a great way to save because any interest you earn on them is completely tax free – so none of it goes to the taxman.
Cash ISA rates are typically comparable with savings accounts, but because your savings are tax free, you could earn more interest than you would with a regular savings account. Of course, tax treatment depends on your individual circumstances and may change.
All ISAs come with a maximum allowance – the total amount you’re allowed to pay into that account in any tax year. In this tax year, ending 5th April 2013, you can save up to £5,640 in one cash ISA. That’s a significant sum of money and could be enough to cover even quite a luxurious holiday for the whole family.
Of course, some special events, such as weddings, can be considerably more costly than that – especially if you want lots of guests. But there’s nothing to stop you adding together the amount you’ve saved in ISAs over two, or more, years – to afford the wedding of your dreams.
ISAs let you pay in a regular sum each month so you can watch your savings build over time. But some also allow you to pay in lump sums when you have some spare cash – such as after a bonus, for example – as long as you don’t go over your yearly allowance. Which means you might be in a position to top up your ISA if your monthly payments don’t take you to the full allowance, to maximise your tax-free savings.
Saving to improve your home?
When it comes to home improvements, budgeting is incredibly important because it’s very easy to underestimate costs – and they can spiral. Plus the fact that once you’ve started work on your house, the chances are you will want it finished as soon as possible so you can get things straight again. But, once again, a cash ISA can be a great way to save – because most people only consider large-scale home improvements once in a while. So the longer term planning and saving that you can do with cash ISAs could be just right.
One last great thing about some cash ISAs is that you can open them with just £1. But others require larger sums – so be sure to compare ISAs to find a product that suits your budget. And remember, the sooner you’re able to start saving with an ISA, the sooner you can relax in the knowledge that your plans for the future are covered.