Savings accounts

[mumofthreesmallmen3]

Hi I have a few questions about savings accounts (sorry if there really silly!) I'm mid twenties and want to start saving around 100 a month just to build up savings for the future. My bank offers two different accounts and I'm not sure which will be the best one to go for. The first is a monthly saver account that for the first year gives 2% gross/ aer then after the year is up drops to a lower rate. The second account I could get is a cash isa which offers 0.35 tax free aer. I'm a bit unsure what the tax free but means, will pick be better off on the first account? I have also just opened a private pension account to pay in a set amount each month am I right that for everything I pay in the government will give a extra 20% of that on top? Thank you!

[harderandharder2breathe]

You can now earn up to £1,000 of interest a year before it becomes taxable, so for the amount you've said I would use the non ISA savings account with higher interest, then move it somewhere else in a years time when the rate drops. Not sure if you need to complete a tax return to declare interest even if under £1,000 though.

(I'm not an adviser but reasonably knowledgable about ISAs through work)

[specialsubject]

Neither of those. Even in these times you can do better.

On that sum there are current accounts paying 3%. This is very slightly above inflation.

There are also monthly savers paying more - remember their headline rate is not the a e r.

[MrsPussinBoots]

You're right about the pension. E.g. For every £8 you put in, the government tops it up to £10.
With savings, inflation is so high that the interest is eroded. Some financial advisers are recommending against cash savings except for emergency money. If you want to make your money work then it's worth having a meeting with a financial adviser - many offer a free initial meeting. Or try the boring-money website, it's very user friendly. I'm an IFA admin but not qualified.