Although the above exclamation may not be strictly true (I can think of one or two situations when there might just be a more attractive alternative), the fact is that many of us are happy to find any excuse not to put something away for the future.

 

Affordability and a need for access to your money are the most common issues to overcome.

 

However, if you can manage to arrange your finances in such a way as to be able to identify a reasonable sum each month, this can be the most effective way to accumulate a useful nest egg, which if having selected the right product, can allow access at any time if the need arises.

 

Having established that you can put something away each month, the next question is where to save it.

 

Individual Savings Accounts (ISA’s) may well be the best option. These are generally open-ended arrangements, providing access at any time and allow you to achieve profits, which are subject to neither income nor capital gains tax.

 

Every individual can save up to £10,200 per annum (£850 per month), where half of this can be held in a Cash ISA from a bank or building society, where interest is paid gross. The other half or indeed all of the £10,200 allowance can be held in an Investment ISA, which provides access to alternative asset classes such as property shares, gilts and fixed interest investments and stocks, & shares either directly or via unit trust/collective funds.

 

If you want low risk or a lower level of contributions, it may be best to start with a Cash ISA, in order to build up funds which may be considered for a transfer to an Investment ISA once a reasonable fund has built up.

 

For larger regular contributions, an Investment ISA, despite the additional risk, may provide the potential for greater returns. This is down to the principle of  ‘pound cost averaging’, where it can be demonstrated that the added volatility associated with market related funds can actually improve the outcome for regular savers, as the following diagram illustrates;