You have probably heard us discuss some of the component parts to this, such as cash flow forecasting and smarter investing etc. However, one of the areas we cover is being smarter with the everyday issues, such as where do you keep your cash that is needed to cover everyday spending and direct debits etc.



Most clients tend to have ordinary bank accounts that pay very little if any interest, and yet the level of cash kept in these accounts can be many thousands or even tens of thousands of pounds.

So, what options do you have, and is this important anyway?

Well, first of all, we understand that some clients have an emotional attachment to their bank. After all, they may have been with them since they were a student, and the local branch is fine for them.

However, it could damage your wealth over time!

You have two main options.

Option 1 - Offset Flexible Mortgage With Current Account

Many of our clients have this type of mortgage. In recent years, the interest rates on these have reduced, meaning that the rates are almost as competitive as the cheapest deals.

If you are self-employed or have private practice income, this option is even more useful, since you can park your tax monies here.

For higher rate tax payers, this means that you are obtaining as an interest rate the actual mortgage rate of, say, 5.5%. But of course this is tax free, compared to a normal account being taxed at your highest rate.

However, just looking at a balance level on average of say £7,500 in a given month, the savings could come to over £400 a year. If you take this over 10 years, then we don't think £4,000 is to be sniffed at.

Option 2 - Current Accounts That Pay Interest

If the mortgage option is not relevant, it makes sense to ensure that on any balances in your account, you get a decent rate of interest.

There are many more banks and building societies now offering competitive rates. Taking one offering from the Halifax, it gives 6.17% gross providing you pay in at least £1,000 per month. So instead of recieving little or nothing on your account, you could earn £462 a year.

This is taxable of course, which would mean net interest of £370 for basic payers, and £277 for higher rate payers. On a joint account it would be circa £323. Still, over time this adds up, and we would much rather you had this than adding to the bank's profits!

The Financial Tips Bottom Line

Make sure you get the best value you can on each and every part of your financial planning, as it can soon add up to substantial amounts over time.

ACTION POINT

If you have a mortgage, investigate whether an offset loan would prove your best option. If not, and you are not being offered a decent rate on your current account, switch to a bank who will offer you this.

After all...it's YOUR money!