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By Halifax

Date: Friday 29 Aug 2008

Most of us probably prefer spending money to saving it, but in the current financial climate, millions of people are choosing to put money away. In fact, banks and building societies are seeing a strong growth in the amount of money being saved. (Can this be demonstrated if challenged?)

Putting a little money into a savings account, could give you a tidy amount to spend when you need or want it. Depending on your circumstances, you could see some great returns from a high-interest savings account. To make the most of your savings, look at ways of doing so without paying tax. If you want to hold onto everything you receive in interest, you can do so with an Individual Savings Account, more commonly known as an ISA.

ISAs were introduced in 1999, so if you haven't got one already the chances are that you've heard of them. Simply put, they allow you to save without paying tax on what you earn from your savings. There are two kinds of ISA – 'cash', and 'stocks and shares'.

You can put your money in either type of ISA, or both, during the same financial year, putting a combined total of up to £7,200 into the ISAs that you open. All £7,200 of this could go into a stocks and shares ISA, or you could put anything up to the £3,600 limit into a cash ISA, and invest the remainder into stocks and shares.

Choosing the right ISA will depend on what you need from a savings account. If you want easy access to your money and a simple interest rate to keep track of, a cash ISA fits the bill perfectly. You can put up to £3,600 into a cash ISA in any one tax year, and your money will earn interest without the tax man getting a penny.

There is a wide range of cash ISAs which have fixed and variable rates of interest, some of them letting you withdraw money at any time. With all of them, you can only deposit £3,600 during one tax year,. For example, if you pay in £3,600 and withdraw £1,000, you can't put any more money in the ISA even though the balance stands at £2,600.

If you're looking for a longer-term investment and are comfortable with linking to the stock market, a stocks and shares ISA may be more suitable. These invest your money in a portfolio of shares, the value of which could go up or down and you may not get back what you invested. Not all banks and building societies offer this type of ISA, and each will invest in different stocks and shares.

Any authorised bank or building society can offer ISAs – there is a range of Halifax ISAs and a handy chart to help you choose the right one to suit your needs. If you're saving without one at the moment, you're giving the taxman money that you could be keeping.

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