Which is the best way to save money?

[nealios]

Say i have a lump sum of �3000. Can anyone reccomend the best way to save it. For example through a high interest ISA?

Any other high interest ways, without risk of losing the money?

[BigMac]

Pay off any debt first, particularly store cards, then credit cards. Start a regular savings plan to put the amount that used to go to the cards into a mini-cash ISA.

If no debts, use the capital to offset against a mortgage - you won't get any credit interest but you will significantly reduce your mortgage interest payments and/or the mortgage term.

If no debts/mortgage, put it in a min-cash ISA - you can invest �3k per tax year, the interest is not taxed and the capital is safe. Look at internet only ISAs as well as 'tying up' the money for 3/6/12 months to get a better rate.

[WendyS]

BicMac is correct in that any debts you have should be paid off first as the interest on them is bound to be higher than the interest you would receive on a savings account. If you are a taxpayer and want something totally risk free, you could opt for premium bonds if you want a gamble but you won't receive any interest and with only 3,000 your chances of winning anything are pretty low. The other best option is a Mini Cash ISA but interest rates are forecast to rise again over the next few months so if you want to switch to a higher paying ISA, make sure you pick one without an exit penalty. If you have a mortgage, you could reduce its by paying off �3,000 but make sure this doesn't leave you denuded of "emergency money" as it's recommended that everybody should ideally have 3 months living expenses saved in case of unexpected illness or redundany, etc.

[nealios]

Thanks very much for both your detailed answers. As i thought the mini ISA seems to be the best option for me at the moment!

[Nether Edge]

Or put - say - �1000 of it in Premium Bonds. Money guaranteed safe, encash whenever you want, no tax on interest (because no interest), and reasonable odds of a win- far better than National Lottery.