Intelligent ISA

I've been looking at who to transfer my cash ISA to. These are tax free savings accounts, so its silly not to have one. The interest rates are pretty low at the moment, but they will pick up over time.

At the moment you can only save £3600 per year into an ISA (next year £5100). This may seem like a tiny amount but over time it will build up and the interest earned will be far more significant. This will take time, but its better than doing nothing. You should never touch an ISA. It's main purpose for me, is to practice and prove my financial discipline, as it takes years to build it up.

The other type of ISA is stocks and shares, but these are only for investing, as you could lose all of your money with them. Cash ISAs are safe and simple, and if I want to invest in the stockmarket there are many other, and better ways, than a stocks and shares ISA.

Like bank accounts, after one year, cash ISAs usually change their interest rates. The one I had with NSandI was originally paying around 5%. Now they have dropped it to 1.30%! I'm going to move to Intelligent Finance which currently offers 2.75%. This is a personal choice, based on a range of my personal investment strategy factors: It's a decent current rate, I can take money out in case of a (big) emergency, and most importantly it is better than earning 1.30%!

I feel guilty leaving for a new bank, I feel disloyal. This shows how human emotion and the mind, can hold you back from making money. A book I reccommend is The Three Most Important Lessons by Martin Lewis. In it, he reminds us that the banks are not our friends, they are private businesses. They will make profit from giving you low interest rates, while they keep the rest for themselves. I think that is theft, and the only way to stop it, is to leave for another bank!

I spoke to a thrifty work colleague a few years ago, and she said that she had a few ISAs and opens a new one every year. This is wrong, as the interest rates on all of her old ISAs would have dropped. Its always best to transfer the whole lot into one ISA, so you should only ever have one ISA at any one time.

For more details, look at the stuff Martin Lewis has prepared about cash ISA's at Money Saving Expert.