What is an individual savings account?
Individual savings accounts (ISAs) were introduced by the government in 1999 in order to encourage more Brits to save money.
The main benefit of saving money in an ISA is that any money you choose to save will not be subject to taxation, as it would be if it was invested in a number of other schemes. Many users find that they are able to save money with much greater efficiency in an ISA then they would by investing bonds or stocks, shares or property.
The rules regarding ISAs were dramatically revamped in 2008 to make it much easier for the concept to understand. There are now just two types of basic ISA – a cash ISA or a stocks and shares ISA. This article explains how each of these accounts can help save money.
Cash ISAs
Cash ISAs typically cost nothing to set up and are similar to most savings account, apart from the tax-free element. Customers might have to commit paying a certain amount into the account either as a lump-sum or on a monthly basis. However, it is much easier to withdraw of your ISA savings than it is to redeem money from bonds, stocks or shares earlier than agreed.
Stocks and Shares ISAs
Stocks and shares ISAs were designed specifically for money awaiting investment. By using this type of ISA, investors won’t have any gains they make on the stock market taxed.
In order to be eligible for a stocks and shares ISA, customers typically have to ensure there is a significant risk of losing a certain percentage of their funds. They may also have to ensure that some of their money leaves the account at a certain rate. Some providers might charge a monthly management fees for these sort of accounts, but they can definitely still help stock market investors make significant profits.
Individual Savings Accounts are generally available to anyone over 16, or over 18 for stocks and shares accounts. They are available from most banks, building societies, fund managers and supermarkets. They should be thought of as medium to long-term investments. If managed right, they are typically a great low-risk option for those hoping to save some cash over a few years.
About the author: Connor Milliard is a self established author and critic writes articles on trade and finance related issues. For more information on ISA savings and Guaranteed Savings Plan he recommends you to visit http://www.forestersfriendlysociety.co.uk
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