Saving regularly is one of the most important financial habits you can build. But after years of working with clients, one thing becomes very clear.
Good financial planning is not just about what you do with your money. It is also about what you stop doing.
Some of the most common savings habits can slowly reduce your returns over time. With the start of a new tax year, it is a good opportunity to review where your money is sitting and whether it is working as hard as it could be.
Here are six savings mistakes to avoid in the new tax year, along with simple ways to improve your approach and support your financial plan…
1. Only Using High Street Banks
Familiar names feel safe, and many people naturally default to high street banks for their savings.
However, when it comes to savings interest rates, they are not always the most competitive.
Looking across the wider market, including challenger banks, can often result in higher returns while still benefiting from Financial Services Compensation Scheme (FSCS) protection.
Loyalty does not always pay when it comes to savings. Reviewing your options can make a meaningful difference.
2. Letting Savings Sit Untouched
Savings accounts are often treated as “set and forget”, but in reality, interest rates change regularly.
Bonus rates expire, fixed terms end, and accounts that were once performing well can become uncompetitive.
Aim to review your savings at least once a year. Check maturity dates, expiring bonuses and whether better rates are available.
3. Holding Too Much in Easy Access Accounts
Easy access savings accounts offer flexibility and peace of mind, which makes them an important part of any financial plan.
But they typically offer lower interest rates compared to fixed-term options.
If you are holding larger balances, it may be worth considering a more structured approach.
A balanced strategy could include:
- Keeping a portion in easy access for emergencies
- Placing the rest into fixed-term accounts to improve returns
This helps balance flexibility with earning potential.
4. Automatically Choosing Short-Term Fixes
Many savers default to one-year fixed rates because they feel safer and more flexible.
However, longer-term fixed accounts can sometimes offer better rates and more certainty, particularly in a falling interest rate environment.
The key is not choosing the shortest term by default, but aligning your savings with your time horizon and financial goals.
5. Ignoring Tax on Savings
As your savings grow, so can the tax implications.
Interest earned outside of tax-efficient wrappers may be subject to income tax, depending on your personal allowance and tax band.
Understanding your Personal Savings Allowance and making use of options like ISAs can help protect your returns although tax treatment depends on individual circumstances and may be subject to change.
Tax efficiency becomes more important as balances (and savings rates) increase.
6. Taking Interest Monthly When You Do Not Need It
Some savings accounts offer the option to receive interest monthly rather than annually.
While this can be useful if you need additional income, it often means:
- A slightly lower interest rate
- Missing out on the benefits of compounding
Allowing interest to remain in the account means your money earns interest on interest over time, which can significantly improve long-term returns.
Cash vs Long-Term Growth
Cash savings play a vital role in financial security. They provide stability, support short-term goals and act as a buffer for unexpected expenses.
However, over the long term, inflation reduces the purchasing power of cash.
This is why savings should not be viewed in isolation, but as part of a wider financial plan that may also include investments and pensions for longer-term growth.
The start of a new tax year is the perfect time to pause and reflect.
Ask yourself:
“Is my money sitting in the right places for the goals I have now?”
Small changes to where your money is held can make a meaningful difference over time, without increasing risk unnecessarily.
Improving your savings strategy is not about chasing every new rate or constantly switching accounts. It is about being intentional.
Understanding where your money is, how it is working and whether it aligns with your goals can help you build stronger financial foundations.
If your savings have not been reviewed in a while, now is a good time to start.
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At Willow Tree Financial Services, we offer personalised advice on financial planning, mortgages, investments, pensions, insurance, and estate planning — tailored to your goals and circumstances.
We help you create a sustainable retirement plan so you can enjoy the life you want with greater clarity and confidence.
If you’d like this, you can call us on 01323 436680, get in touch here:
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Your home may be repossessed if you do not keep up repayments on your mortgage.
The value of investments and pensions, and any income they produce, can fall as well as rise. You may get back less than you invested.
Inheritance Tax Planning and Advice on Cash on Deposit is not regulated by the Financial Conduct Authority.
The Financial Conduct Authority does not regulate wills, trusts, estate planning, and lasting power of attorney. Will writing and lasting powers of attorney are not part of the Quilter Financial Planning offering and are offered in our own right.
Quilter Financial Planning accept no responsibility for these aspects of our business.
