How to sort out ALL your savings in just an hour on your lunch break

Sorting out your savings is one of those chores that can seem so laborious it’s tempting to put off until another day.

But postponing it could cost you vast sums in lost interest or needless tax bills.

Getting your savings into shape needn’t be a faff. Get a cup of tea, sit down and use these simple steps to get it done on your lunch break.

Rachel Rickard Straus runs through what you need to do here. 

Step one: Check what you’ve got

Make a list of any existing savings and investment accounts – both the ordinary and the tax-free Isa ones. Don’t worry if you don’t have any yet, it’s never too late to start saving. 

There are 11 million working-age people in Britain without at least £1,000 in their rainy day savings, according to think tank the Resolution Foundation.

Once you’ve made a list, check if each account is still fit for purpose by looking at what interest you’re earning through logging on to them or contacting your provider.

This step could be uncomfortable. If you’ve not checked an account for a while, there’s a good chance that cash you thought was busily earning interest for you at the rate when it was first opened is actually making a fraction of that.

Some providers play fair and don’t cut your rate while your back is turned. But many offer bonuses that last for a few months after which the rate drops, or put your money into a low-paying account once your fixed-term deal comes to an end.

You need to maximise what you have, ideally by moving to the best rate and a tax-free cash Isa.  

If you do go for one with a bonus, put a note in your diary of the date it expires, so you remember to move your cash to a higher-paying account. 

If you know you’re not organised enough to do that, opt for an account that may not be at the very top of the leaderboard, but is consistently competitive.

> Check the best cash Isa rates in our savings tables.

Step two: Get sheltering

Move whatever additional cash you can spare – up to the current allowance of £20,000 a year – into your Isa to shelter it from the taxman.

Start with a cash Isa rather than a stocks and shares Isa, as it’s a good idea to have about three to six months worth of outgoings stashed away before you start investing.

If you are retired and living on income from your cash and investments, you might want slightly more than that in cash if you can. This is so you don’t have to sell your investments when they’re down, because you need the money.

With cash, you have two options: easy-access or locking it away for longer in a fixed-rate account. There is not an easy answer here, but there is a simple solution.

In essence, to decide between easy-access and a fixed-term bond, you need to know if you can afford to lock your money away for a set time and if it will earn you more interest.

Markets are indicating that the Bank of England base rate will continue to fall this year. This would mean that locking into a deal now would likely earn you more interest than waiting or keeping your money in an easy-access account where rates tend to track the base rate.

However, there is no guarantee that market forecasts are correct – be aware that unexpected shocks can sharply change the direction of interest rates.

The simple solution is to open a selection of Isas. You can open as many as you like, so long as you don’t breach your annual £20,000 Isa allowance. Read our essential Isa guide to learn more about how they work.

So you could lock some of your savings away and keep some to hand in an easy-access account in case you need it or if a rate catches your eye another time.

A year or two can feel like a very long time when deciding whether to commit to not touching your cash. If you’re anything like me, you’ll start imagining all sorts of unlikely eventualities for which you might need to get hold of your money.

But one of the great things about Isas is that they have an inbuilt emergency escape cord to pull if you need to. If you do lock your money away and something unforeseen happens that means you need to access your cash, you can always close the Isa.

You will probably have to pay a fine in the form of lost interest, but at least you have that security.

Fixed-rate bonds outside of an Isa do not have this advantage. You are unlikely to be able to close an account before the end of the term except in extreme circumstances. Always check an account’s terms and conditions.

Step three: Put your CASH to work

Now the tax-free cash is sorted, it’s time to move on to investments. If you have not used a stocks and shares Isa before, it can feel like a huge leap.

After all, with cash you know exactly how much you have in your account at all times – with investments the amount changes from one day to the next.

However, although investment in this way comes with risk, there are ways of keeping it under control and only taking on a level that you are comfortable with.

You can open a stocks and shares Isa on an investment platform – some examples include Hargreaves Lansdown, Dodl, Interactive Investor, Trading 212 and Nutmeg – or through your bank.

If you are a real newbie, you can start small – say with a direct debit of £25 a month – to test the water and build up from there.

There are a number of so-called robo-advisers that will manage your stocks and shares Isa for you, so you don’t have to make a single decision about what to put your money in.

Read This is Money’s excellent guide to picking the best investment platform to suit your needs.

If you’re thinking that this all sounds very well for someone else, but you’d rather stick with the security of cash, thank you very much, remember this.

If you’d put £1,000 in a cash Isa when they were launched in 1999, you would have around £2,016 today, according to calculations by investment platform AJ Bell. 

However, if you’d invested it in a portfolio of global companies, you would have £4,641 today. That is a huge difference of £2,625.

Of course, there are always highs and lows when it comes to investing and there’s no guarantee that you’d make such returns over the next 26 years. But investing does tend to outperform saving over the long term, over almost all time periods.

Step four: Make it work even harder

If you already have a stocks and shares Isa, your next task is to check you’re still getting a good deal.

New players enter the market all the time, offering different fee structures, functionality and support. If you’ve not shopped around for a while, you may be missing out.

Remember that you can have more than one stocks and shares Isa. That means you could always test the water with a new provider and transfer your existing investments later if you get on with it.

Make sure that you ask the new provider to do the transfer rather than doing it yourself to maintain its tax-free wrapper.

It’s also worth having a spring clean of the investments in your portfolio. If you’ve already checked on your cash holdings and made sure you’re on the right platform, you’ve probably run out of time to scrutinise your portfolio as well.

But do it at least a couple times a year just to check your holdings still align with your aims and strategy. go to our Six steps to do an annual health check on your investments for a great step-by-step guide.