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Find the best savings plans for your nest egg

The economy has created a tough climate for savers. Formulating effective savings plans has become increasingly difficult. Before deciding to put your cash into bonds, equities or simply a deposit account, it is important to decide whether your priority is security or growth potential. With the future uncertain, it's important to know your nest egg won't lose value.

Time to dip a toe in the market?

After a couple of years of market volatility, some experts are suggesting that investment in equities is a sensible move, with many shares undervalued or with considerable growth potential. Savings plans that are entirely reliant on the market might be a little too risky for some investors who have seen the havoc that can be caused by banking collapses. If you want to build up a share portfolio, ensure that you hedge at least some of your funds in more stable areas like property shares.

Smaller investors might wonder whether to go for bonds or deposit accounts. Fixed rate bonds can offer some decent rates of return if you are willing to tie up your capital for two or, better, five years.

Make sure you have taken advantage of your allowance for tax-free ISA savings. The present rates allow investment of £5,640 in cash ISAs or £11,280 in an shares investment ISA.

It isn't very exciting in terms of speculation, but during a time of low interest rates, the best savings plans can involve paying off debts. Overpaying a mortgage is a sensible precaution when mortgage rates are rock bottom. Home-owners will be in a much more comfortable position once loan rates begin to rise.

Respond quickly to market moves

The best savings plans will include a degree of flexibility. If interest rates take a sudden lurch upwards, you want to be in a position where you can take advantage. Check the conditions on your investments to see if there are penalties for early withdrawals, or whether it is possible to move your money to new accounts freely.

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