Capital gains: don't let your money languish

Putting aside the money and budgeting to spend less than you earn can help build what could be a valuable bottom if things go wrong, but how can help you earn some cash interest while you have it hidden?

Apart from traditional savings accounts of easy access that have seen relatively low rates of return lately, there are a number of other options that you want to consider.

Improve your earning potential of capital:

Special offers. Many banks and other savings providers offer special limited period offer, especially if you’re willing to tie up their money for a specific period. Use these wherever possible, keep track of your savings and move them around once the fixed period is over. In this way, you’re getting the best rates for your savings. Don’t be afraid to change provider if you can get a better deal with someone else.

Tax savings. Make the most of your ISA allowance-even if you’ve seen a better interest rate offered elsewhere. Save or invest through cash or stocks and shares ISA could mean significant tax savings on UK income and capital gains, and more for your money in real terms.

Investments. Invest your money must not involve risking your whole capital in a scenario of all or nothing, and there are a range of investment options that can provide a relatively low-risk way to earn a bit of extra interest on your savings, as fixed-rate bonds. However it is important to remember that in pursuit of higher returns you may not get back what you put in, investment is not all right and you should consider your attitude to risk carefully before proceeding.

More importantly, make sure you keep track of your money. The capital may lose real-time value terms if left to languish in an account that offers little in the way of returns, lagging behind inflation. Many accounts will offer a special rate for the initial deposit and then switch to a standard rate later.

If you are unsure about the correct option for your needs you may want to consider talking to an independent financial adviser who can help you talk through your options when it comes to saving or investment. Just because we live in a difficult economic climate, that doesn’t mean you can’t get your capital working hard for you.