It can be very easy, once you have chosen a savings account suitable for your needs, to leave your cash invested there. However, selecting an appropriate account is only half the battle. Keeping your money invested with the most suitable, and best, account for you takes continual monitoring of your accounts.
Staying on top of your investments does not need to be a tiresome or troublesome task, however. The best way to monitor your investments is to do so regularly and check your savings accounts against the broader market. From there, you can choose when you should transfer to a new savings account - or other financial instruments.
Here, we look at what should trigger you to move your money elsewhere and why.
When should you transfer to a new savings account?
There are several situations that should make you investigate further as to whether you should switch your savings accounts. Not all will immediately mean that you should automatically transfer your funds elsewhere. However, any of these events are definitely a time you should weigh up the advantages to other accounts in comparison to where your money already is.
End of an introductory rate
Many savings accounts lure in new customers with a high introductory rate. That rate can often be far higher than many other savings products that the broader market is currently offering. However, many savings accounts with high introductory rates are just that - introductory rates. After a specified period, your savings start to earn much lower interest.
That period is usually around a year, but it could be shorter or longer depending on what the provider has set out. It is important to remember when your introductory rate finishes. When it ends, it can amount to a substantial difference in what your account will earn. Many revert to the current BOE rate, which is at historic lows at the moment.
Better rates elsewhere
Just because you may have invested in an account with a market-leading rate when you first opened it, does not mean that that rate will remain market-leading. Banks and buildings societies frequently sell savings accounts with an attractive interest rate. That rate is often higher than their previous offering, or in comparison to their competitor. So, it can be financially beneficial to invest your money in an account with a better rate elsewhere. However, only do so if your savings are in an account that does not penalise you for switching.
The Government continually changes legislation that could affect you and your money. Such changes will be tax rates, savings allowances and other financial policies. Those changes will affect how people should manage their money. For example, ISA account allowances are now far higher than they historically have been.
It is advantageous to stay abreast of any new legislation that improves how and where you can save your money. For instance, ISAs are a tax-efficient way of saving money. Therefore, if the allowance goes up in one year, it can be a good idea to take money out of a savings account and open up a larger ISA. It may be that a bigger ISA will help grow your money more in the long term.
Your changing needs
Investing money should be seen as a continual process. The reason being is, not only do products and policy change, but your needs do too. Just because you opened an account that met your requirements a few years ago, does not mean that it meets your criteria now. For example, when you retire, you no longer earn a salary. As a result, this materially impacts how you may want to use your savings accounts. You may wish to withdraw from them, yet the account you opened a few years ago may penalise you for that. It can, therefore, be worthwhile switching to an account where such penalties are not the case.
Why transferring to a new savings account is important
It is all well and good knowing what the events are that should trigger you reassessing your savings accounts. However, knowing why is a good way of fully understanding how best to make your money work for you to its full potential.
Good money management
Regularly assessing where your money is saved is good practice. Leaving it in one account that you opened a while ago leaves you vulnerable to lower returns. Instead, try to appraise your accounts against the broader market. Doing so will ensure that you always have your money invested where it will earn the best interest rate.
Makes your money work for you
Making your money work as hard for you as possible is ultimately the best reason why you should know when to transfer to a different savings account. Without managing your money and your accounts, you cannot be sure that you are always getting the best interest possible. Additionally, you may miss out on using a potential account that aligns best with your needs.
Moving savings accounts
Moving your savings from one account to another is an integral part of effective money management. Doing so is of particular importance to pensioners due to the finite amount of money many have upon retirement.
Moving accounts doesn’t have to be complicated - nor should it be. Banks must make transferrals as easy as possible for their customers. Constant monitoring of the savings accounts market may sound like a chore. However, given that it could earn you money, it is always a worthwhile activity.