4 mins
June 20, 2024

Stocks & Shares ISA Vs Savings Accounts

Choosing the Right Place for Your Money

Saving for your future is crucial, but with so many options available, deciding where to put your hard-earned cash can be confusing. You might be considering two popular options: Stocks & Shares ISAs and savings accounts. Let's break down the pros and cons of each to help you choose the right one for your financial goals.

Pros & Cons of Traditional Savings Accounts

The word 'Savings' is displayed with a red exclamation mark and green tick, intended to convey the pros and cons of the account type.

  • Safety First: Savings accounts can offer a safe haven for your money. Deposits are typically protected by the FSCS up to £85,000, minimising the risk of losing your money
  • Predictable Growth: Savings accounts often offer specific interest rates, meaning you can predict how much your money will grow over time. However, with inflation, these rates may not always keep pace with the rising cost of living. It's also important to bear in mind that there's a £1,000 personal savings allowance on how much interest you can earn before you start paying tax on it too.
  • Easy Access: Need your funds quick? Some savings accounts offer easy access, allowing you to withdraw funds quickly when needed. Like our GB Bank Base Rate Tracker. You can save confidently in the knowledge that your money is growing, with easy access to your money and peace of mind with FSCS protection
  • Limited Growth Potential: While safe, savings accounts generally offer lower returns compared to the possibilities generated by investment opportunities

The Possibilities of Stocks & Shares ISAs

The word 'ISA' is displayed with a red exclamation mark and green tick, intended to convey the pros and cons of the account type.

  • Higher Growth Potential: Historically, stocks and shares have outperformed savings accounts in terms of long-term returns. By investing in companies through the stock market, you have the potential to grow your money significantly. But of course, your capital is at risk when you invest, so they’re not as secure as a more traditional savings account.
  • Risk and Reward: The stock market is inherently risky. Your investment value can (and will!) fluctuate, and while there is the potential for significant gains, there's also a chance you could lose money.
  • Tax Efficiency: Stocks & Shares ISAs are tax wrappers, meaning your savings and investments have some protection from tax. ISAs offer tax-free growth because you don't pay capital gains tax on profits or income tax on dividends. ISAs do have a maximum allowance of up to £20,000 each year, but the allowance resets each April. You can invest in stocks, ETFs and funds with NuWealth's Stocks & Shares ISA.
  • Long-Term Focus: Stocks & Shares ISAs are ideal for long-term goals. The market can be volatile, so patience is key. And the benefits keep increasing if you can make the most of your tax-free allowance each year.

Please note, tax treatment depends on your individual circumstances and may be subject to change in future

So, Which One is Right for You?

The best option for you depends on your financial goals, risk tolerance, and timeframe. It’s also worth considering having both and using them for different financial goals. An easy access account might be better for short-term goals, whereas a Stocks & Shares ISA could be beneficial to save for those important milestones, like buying a house, getting married, starting a family, or even for retirement.

Here's a quick guide:

Choose a Savings Account if:

  • Safety and guaranteed access to your money is at the top of your priority list
  • You need your money for short-term goals like a holiday or emergency fund
  • Your risk tolerance is low, and you are uncomfortable with market fluctuations

Choose a Stocks & Shares ISA if:

  • You have long-term goals like retirement or a child's education
  • You're comfortable with some risk for potentially higher returns
  • You can afford to leave your money invested for at least 5 years (ideally longer)

Remember: Consider a balanced approach, utilising both savings accounts and Stocks & Shares ISAs to achieve your diverse financial goals.

Our GB Bank Base Rate Tracker offers a competitive 4.91% AER (Annual Equivalent Rate). This could be a great option if you prioritise safety and accessibility while still aiming for some growth that keeps up with inflation. Ours promises to never stray more than up to 0.5% away from the Bank of England Base Rate.

Something Extra to Consider:

In addition to easy access savings accounts, you can also open notice savings accounts. These are great for short-term to mid-term goals that have a specific timeline. They sometimes offer higher interest rates than easy access accounts, and prevent impulse spending, ensuring you’ve got the funds exactly when you need them. With NuWealth, you can open a 30-Day and 95-Day Notice Account.

Additional Tips:

  • Do your own research before investing in any stocks or shares. We have plenty of articles in our Learning Hub for you to get started
  • Start small and gradually increase your investments over time as your confidence and knowledge grows. Making regular contributions over the long-term is one of the best ways to reduce your risk, a strategy known as pound cost averaging 
  • Consider seeking professional financial advice for personalised recommendations

By understanding the differences between Stocks & Shares ISAs and savings accounts, you can make informed decisions about how to save and invest for your future

Start saving with NuWealth

Open a Stocks & Shares ISA or Base Rate Tracker Savings Account
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Remember when investing, your capital is at risk.
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