Three Common Questions About Fixed Rate Bonds
By John T Hughes
Fixed rate bonds are arguably one of the most effective saving
methods for those looking for high returns to help them get the
most from their money. As their name suggests, fixed rate bonds
give consumers the opportunity to lock away a sum of their money
for a set amount of time whilst receiving a fixed rate of interest.
This means that in exchange for an amount of capital, you receive
the assurance that it will grow at a predetermined pace over the
agreed timeframe.
Bonds are not necessarily the best suited option for all savers - it completely depends on what you are hoping to get from your savings account. However they do tend to offer higher rates of interest than other options as you are saving for a set period of time. In this article we will look to solve some of the most common queries regarding fixed rate bonds.
1. How long do I have to save my money for to in order get a good return?
Because 'locking' your money away is a key factor of the fixed rate bond, many people assume that you will have to wave goodbye to your money for decades on end. This is not the case. Some bonds accounts may give you the option to save for ten or more years but usually you choose a period between 6 months and 5 years. Typically the longer the timeframe that you decide to save for, the higher your rate of returns are likely to be you are rewarded accordingly for your commitment.
With some fixed rate bonds accounts, your savings are not completely inaccessible however you could find that you are charged penalties for making withdrawals inside of the agreed timeframe so this may not be advisable. Some people worry about the notion of stowing money away however in the midst of a volatile economic climate, it could offer you some security and peace of mind knowing that the interest rate you receive will remain the same throughout.
2. Do I need tens of thousands to invest in this way?
As bonds are a type of investment, many people assume that you need five figure sums just to open an account but the truth is most can be opened with around £1,000. Obviously the more you invest the higher your returns are likely to be but whether you are tucking some money away for a mortgage deposit or simply saving up for next year's holiday, savings bonds could work for you.
For those of you looking to save higher amounts, fixed rate bonds accounts can usually store a maximum of sums in the six figure region and the fixed rate of interest means that you will be able to estimate just how much your nest-egg will grow over time.
3. There's so many savings options on the market. How do I know a bond is right for me?
Obviously you do not want to store away your money for a period of time if you are not a hundred percent sure about what you are committing yourself to. As with all financial products, the key to making the right choices is to ensure that the decisions you make are as informed as possible.Review the market and compare fixed rate bonds against other savings options, consider the level of interests on offer and remember that with a bond, you are offered that rate for the chosen period of time whereas interest rates with traditional savings accounts may fluctuate.
In the first instance, it is important to consider what you are looking to get from your savings and exactly how much growth you would like. If you are worried about not having access to your savings then you could consider only saving a certain amount in a bonds account and storing the rest in a savings account that you can access without penalisation.
For more information on the different savings accounts and the best fixed rate bonds on the market, an obligation-free conversation with a savings advisor could help you to work out the options best suited to your personal circumstances.
Bonds are not necessarily the best suited option for all savers - it completely depends on what you are hoping to get from your savings account. However they do tend to offer higher rates of interest than other options as you are saving for a set period of time. In this article we will look to solve some of the most common queries regarding fixed rate bonds.
1. How long do I have to save my money for to in order get a good return?
Because 'locking' your money away is a key factor of the fixed rate bond, many people assume that you will have to wave goodbye to your money for decades on end. This is not the case. Some bonds accounts may give you the option to save for ten or more years but usually you choose a period between 6 months and 5 years. Typically the longer the timeframe that you decide to save for, the higher your rate of returns are likely to be you are rewarded accordingly for your commitment.
With some fixed rate bonds accounts, your savings are not completely inaccessible however you could find that you are charged penalties for making withdrawals inside of the agreed timeframe so this may not be advisable. Some people worry about the notion of stowing money away however in the midst of a volatile economic climate, it could offer you some security and peace of mind knowing that the interest rate you receive will remain the same throughout.
2. Do I need tens of thousands to invest in this way?
As bonds are a type of investment, many people assume that you need five figure sums just to open an account but the truth is most can be opened with around £1,000. Obviously the more you invest the higher your returns are likely to be but whether you are tucking some money away for a mortgage deposit or simply saving up for next year's holiday, savings bonds could work for you.
For those of you looking to save higher amounts, fixed rate bonds accounts can usually store a maximum of sums in the six figure region and the fixed rate of interest means that you will be able to estimate just how much your nest-egg will grow over time.
3. There's so many savings options on the market. How do I know a bond is right for me?
Obviously you do not want to store away your money for a period of time if you are not a hundred percent sure about what you are committing yourself to. As with all financial products, the key to making the right choices is to ensure that the decisions you make are as informed as possible.Review the market and compare fixed rate bonds against other savings options, consider the level of interests on offer and remember that with a bond, you are offered that rate for the chosen period of time whereas interest rates with traditional savings accounts may fluctuate.
In the first instance, it is important to consider what you are looking to get from your savings and exactly how much growth you would like. If you are worried about not having access to your savings then you could consider only saving a certain amount in a bonds account and storing the rest in a savings account that you can access without penalisation.
For more information on the different savings accounts and the best fixed rate bonds on the market, an obligation-free conversation with a savings advisor could help you to work out the options best suited to your personal circumstances.
John T Hughes writes for Best Bonds, a site dedicated to helping you to find leading savings or investment bonds options that may be suited to your needs.
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