Where to Put It

If we're looking both to make ends meet but also to have some money left with which to enjoy ourselves in later life, it is essential that we make the most of it in terms of ensuring that it provides the maximum possible income for us.  One of the best ways to get help with personal finances is to get your money working for you!

People of our generation have traditionally kept much of their money in a high street bank current account. The problem with this is that with the non-existent interest rate in these accounts, we actually lose money, in real terms, by keeping money in them. This is another reason for having a budget; so that we know just how much we need to keep in a current account for our day-to-day requirements. We should move all our other money to somewhere that is going to give us a better return. At the moment, of course, with interest rates so low, it is difficult tro get a good return for our money anywhere, which makes it even more important to do some proper research and try to get the best rate possible.

We can, though, even now get better rates for our 'everyday' money than by keeping it in a traditional current account. This will help with our personal finances and give us the maximum amount to spend. Internet banking, if we're happy with it, will give us a higher rate of return than a traditional current account. With the internet banks, you can have a savings account and a current account, with the ability to switch between the two instantaneously. With the current account, you get a debit card and, if you wish, a cheque book, so it's just like an ordinary current account (although you probably won't be able to set up direct debits to pay your bills through it). Keep your money in the savings account, with its higher interest rate, and just switch it when you want to spend some. Even the current account will give you a higher rate than a normal high street current account. Have a look at cahoot (the on-line bank owned by Abbey National) or Ing to get a flavour for internet banking. During the recession their interest rates have dropped dramatically but when we emerge from it and interest rates start to rise again, there is no reason to doubt that they will go up again and far out-perform an ordinary current account.

If you're unhappy about internet banking and would prefer alternative help with your personal finances, then telephone banking is a good alternative. You keep the money in an account that is accessed over the phone and transfer money to your normal current account when you need it. Most of the banks operate a telephone bank, as does Direct Line and, once again, the interest rate is much better than an ordinary current account.

You can also shop around at organisations such as the Halifax and Alliance & Leicester for their current accounts. There is a whole range of offers for current accounts that give a better rate of interest. Those which offer higher rates have some strings attached such as having to save so much each month and/or keeping a minimum balance in them. Some of the more traditional banks offer current accounts that provide, for example, free travel insurance and AA membership, providing you keep a minimum balance in them. Sometimes you have to pay so much a month in order to get these perks. Look at LloydsTSB for an example of these type of accounts.

Some banks have arrangements through which your the current and savings accounts are linked and money is automatically switched from one to the other depending on the levels in each. If this sounds interesting to you, shop around for one that you think is the best for you.

Whichever route you choose to help with personal finances, shop around so that you get the best deal for yourself. Read the financial press and go online to websites such as moneysavingexpert.com (which has all kinds of ideas and ways through which we can save money and make the most of it)and moneysupermarket.com to compare the rates of interest. Ask your friends if they have money in a good current account and, of course, talk to these organisations in person - providing you're confident you can resist the sales pitch!

One thing you can also do is to invest in a mini-ISA. This is where you can put up to £5340 (2011-12) per person per annum into a high interest savings account in which all the interest is tax-free. All the organisations mentioned above, other than Cahoot, provide them as do many other companies; you just have to choose which one to use. Some of them are instant access, so they're just like a tax-free current account, others require notice when you wish to withdraw some money, whilst others are for a fixed term such as one, two, three or four years.

Money that you don't need for your everyday spending, but which you plan to spend over the next five years, you can afford to put in areas where you can't access it immediately or where there's a fixed term. This is money for major expenditure such as new furniture, replacement white goods and so on. You might already have the money but don't want or need to spend it yet or you might need to save it. Either way, you need your money to work for you, to help with your personal finance.

 So an ISA,which we have talked about already, is a good vehicle for this money. However, if you have more than the £5340 in a tax year to put away then put the money in areas where you have to give notice to get at it or where there is a fixed term, in return for which you get a higher rate of interest, sometimes tax free. Again, most of the major financial organisations offer these type of accounts so shop around to get the best rates.

National Savings also falls into this category, through which you can get National Savings bonds. These are either income or savings bonds. The bonds attract income tax but their advantage is that you can withdraw money from them without notice at any time without penalty. So they could form part of our 'everyday' money as well as being for the medium term.

 There are also many other bonds available, from commercial organisations such as the banks. If you want to look at these, go to www.moneyworld, which offers many bonds at a discounted price.

The other aspect of National Savings is Premium Bonds. These are almost instant access (you can redeem them in as little as two weeks) and your money is at no risk. What is at risk is the interest you would have got if you had put the money somewhere else. The gamble is that you might win one of the many prizes that are on offer - including the One million prize each month! The minimum you can invest is £100 with the maximum being £30,000.

Finally, once you have catered for today and your planned expenditure over the next five years, you might consider making some investments in order to help your personal finances. However, you must always remember that, whilst you can get potentially higher returns for your money, you might also lose it, because for any investment there is a risk. Investments can go down as well as up, which is why you should be prepared to keep them for at least five years and it should be money that, in theory at least, you can afford to lose.

Bearing that in mind, a good place to invest money is with a maxi ISA. This is an ISA through which your money is invested in the stock market and all the growth, or profit, is tax free. If you haven't got a mini ISA, you can invest up to £10,200 per annum per person . If you have got a mini ISA, the maximum you can have invested with your mini and maxi ISA together is £10,200. With maxi ISAs you can invest in one single share or in a range of shares that will be managed for you by the company with which you invest. Again, all the major financial institutions will offer share ISAs or you can do it yourself if you go to selftrade.com. For a very clear description of all ISAs, go to moneysupermarket.com

You can also invest in individual stocks and shares, property, bonds, unit trusts or gilts. However, before you consider doing any of this, you should seek professional advice. Click on Getting Financial Help for some ideas about how to go about this. You could also collect things. People collect all sorts of things: wine, whisky, art, furniture, china, porcelain, stamps etc etc. Very often it's associated with a hobby, so they get pleasure out of the collecting, but the objective is for the investment to increase in value so that it can be sold at a profit.

So making the most of our money by putting it in the most appropriate and advantageous places to suit our needs requires some thought. However, you can get help with this aspect of your personal finances through sources such as the financial press and the internet. Use those sources, shop around and get the best deals that are on offer.

For other ways through which you can help make the most of your personal finances, click on the links in the box to the other pages of this Guide.