For the uninitiated, an ISA, or Individual Savings Account, in basic terms is a savings accountwhere you aren’t taxed on the interest that you can earn. You can only put a certain amount of money per year into an ISA however, but as well as cash investments there are opportunities to invest your stocks and shares.
You’d be forgiven for occasionally feeling a little jaded or disgruntled with the banks in this country; in the aftermath of the banking scandal it’s difficult to know who to trust with your money.
Equally, it’s a tricky situation because we all need to invest our money in some way but are ISAs really the best option? Since their introduction in 1999 to encourage the public to try and save, it has become apparent there are both advantages and disadvantages to these accounts. What follows is a balanced look at some examples of these:
The Advantages
Firstly, there are some reasons why ISAs can be something very beneficial for those looking to set up an account.
- There are many different options available for you which you can select to suit what you intend to invest with and how regularly. Be it your physical income or any stocks and shares you are involved with.
- Arguably the most significant advantage is the tax benefits that you can enjoy, particularly if you are looking to keep the account for a long period of time. At the same time any capital gains are tax free.
- Parents can also set up ‘Junior ISAs’ to help invest in the financial future of their children. These become available to them when they reach a certain age.
The Disadvantages
There are some negative aspects though that you need to consider:
- The capped allowances on many ISAs are a big sticking point for many, particularly those who may want to invest larger amounts.
- When it comes to wanting to move your money between accounts, you can encounter difficulties if you use a number of banks or building societies.
- For stocks and shares you also run the risk of the markets changing and the value of them potentially dropping significantly.
The Bottom Line
At the end of the day, your decision should be based on your immediate needs, but also ISAs are quick to set up and you can close your accounts if you feel they aren’t for you. Alternatively there are other options to consider and you can seek professional help if you are struggling with your finances.
