Regular saving: Bank on setting something aside

To get the most out of your money you need to decide what you are saving for. Is it an emergency pot for the proverbial rainy day, or are you saving for something specific such as a holiday? Then you should have some idea of how long to plan to save for and how much notice you are prepared to give when you want access to your money.

If you want instant access you no longer have to accept pitifully low rates of interest. The best deals tend to be on instant access postal accounts, which typically involve sending a withdrawal form to the bank or building society that send you a cheque by return of post.

But some building societies, such as Nationwide, now offer instant access postal accounts with a cashpoint card for use in emergencies. You can open this account with just pounds 1 and interest starts at 6.7 per cent, rising to 6.85 per cent for over pounds 10,000 and 7 per cent over pounds 25,000.

It is also worth checking out the instant access accounts offered by the new-style banks run by supermarkets and insurance companies. Among the best instant access accounts is Sainsbury Bank's, which pays a flat rate of 6.5 per cent on savings of pounds 1 or more, while Scottish Widows Bank offers 6.9 per cent on balances of pounds 500 or more.

Postal accounts requiring a notice period tend to offer better rates of interest but usually require a relatively high minimum balance. For example, Chelsea Building Society's POST-tel Option 40 postal account requires a minimum balance of pounds 5,000 and 40 days' notice before making a withdrawal. In return you earn 7.55 per cent interest. If you are prepared to give a longer notice period, you could consider Legal & General Bank's 60-day notice postal account, which pays 7.65 per cent on pounds 2,500.

For those prepared to save a set amount on a regular basis there is a wide range of accounts available. You usually have to save a set amount for a fixed period in return for an enhanced rate of interest. Bradford & Bingley, for example, offers 7.15 per cent if you agree to save a fixed amount between pounds 10 and pounds 100 a month for three years.

If you are able to save for five years, you should open a tax-exempt special savings account (Tessa). You can save up to pounds 9,000 - pounds 3,000 in year one, pounds 1,800 in years two, three and four, and pounds 600 in year five. Tessas are tax-free providing you do not withdraw more than the net annual interest each year. This makes them the best paying accounts on offer for taxpayers.

"Tessas are due to be replaced in April 1999 by the new ISAs [individual savings accounts], so it makes sense to open one now if you can," says Darren Stevens of Chelsea Building Society. "They still make good sense because any Tessa opened prior to the introduction of ISAs can be seen through to the end of its term. Regular savers and lump sum investors should take advantage of Tessas as long as they can."

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