Savvy savers always need to be on the look-out for the best available deals for their cash.
But how you save matters too and that's why it makes sense to take advantage of tax-free accounts.
That opportunity comes in the form of cash Individual Savings Accounts (Isa) - but make sure you shop around to ensure the one you pick pays out the best returns on your nest egg.
1. What is a cash Isa?
If you've got any savings, the rules are simple - you should have an Isa. The reason? You can avoid handing over a huge portion of your savings interest to the taxman.
Unlike a normal savings account, Isa interest does not incur tax - and that means an extra 20 per cent or 40 per cent of the return on your nest egg is kept by you.
An Isa can be used by anyone aged 16 or older for their tax-free savings allowance each tax year. In the 6 April 2012 to 5 April 2013 tax year the cash Isa allowance is currently £5,640. From April 6 2013, this will increase to £5,760.
Those under 16 can qualify for a Junior Isa account instead, as long as they were not part of the age group who qualified for a Child Trust Fund , which was all children born between September 1, 2002, and January 2, 2011.
This must be opened by an adult with parental responsibility for the child. The maximum contribution limit for a Junior Isa is currently £3,600. Read more on Junior Isas.
2. How do cash Isas work?Every April you get a new allowances, giving you the opportunity to either add to an existing Isa, or open up a new account. You should also make sure that you transfer an old Isa for better returns.
Each year as the Isa deadline nears, banks and building societies tend to compete to pull in savers with good rates on new accounts. A knock-on effect is that many previous best buy Isas see their rates drift lower.
This means that savers should review their existing Isas and see if they can transfer their cash elsewhere to a new better rate - but they must use the official Isa transfer system to avoid losing their tax-free protection (see below).
While you can only open one cash Isa each year, there is no limit to how many times you can transfer existing Isa savings.
You can withdraw cash whenever you want from cash Isa accounts, subject to individual accounts' conditions. However, once the money has been taken out, you cannot get that bit of your tax-free allowance back.
This is because you can only pay in that set amount every year to a cash Isa, even if you take some of it back out. So if you do think that you will hit the annual cash Isa savings limit, think carefully before you withdraw money.
3. What cash Isas can you get?There are a variety of cash Isas available, but the most popular are instant access or fixed rate.
Both do exactly what they say on the tin – instant access accounts allow you to withdraw money, or transfer your savings pot to another account, at any time. Always check the small print for conditions, extra fees or charges for doing so, just in case.
Fixed rate cash Isas tend to offer slightly higher interest rates, but you cannot withdraw or transfer your savings until after an agreed length of time – usually one, two, three or five years – without incurring a hefty interest loss penalty.
New savers will typically want to look at easy access cash Isas, or those with a reasonable notice period, this will ensure that your rainy day pot is not locked away in an account that you can't access if you need it.
Fixed rate cash Isas are good for those with a larger lump sum that you don’t need access. Be aware, though, that you are locking the money up and that if interest rates rise during that period, other accounts could go on offer with a better rate that you cannot access.
To find the best Isa rates for all types of account go to This is Money’s independently compiled savings tables.
4. Why it is important to move to better dealsSavers usually need to transfer cash Isa nest eggs to a new provider as often as once a year to avoid a rate crash.
Every year, some banks and building societies cut the returns they pay out to their customers as short-term bonuses expire and fixed terms mature.
Sometimes as much as 90 per cent can be shaved off a best buy rate overnight. Fixed deal rates can fall to returns of a mere 0.5 per cent or less.
So you need to make a note of when your rate is due to all and then move your money to a better deal.
But many are surprised to find you cannot simply withdraw the cash and lug it across town to a branch at another bank.
Taking out cash just to reinvest it elsewhere is THE cardinal sin in Isa saving. Why? Because you lose the tax-free interest status of your money.
5