What Is a Cash ISA?

Sometimes I wish I lived in UK. They have some great investment opportunities there, one of the best crowdfunding sites (will talk about it in another post), and cool opportunities like cash ISA accounts.

So What Is It?

Cash ISA accounts allow you to earn interest on your money without paying tax on it. These accounts are available to individuals (ISA means individual savings account) and are limited by the amount of money you can keep in them.

You can only put £5,640 per year in such account in cash, and another £5,640 in shares and stocks. Once you are at least 50 years old you can increase these amounts. Note that the £5,640 put in stock/bonds ISA can be exceeded but that’s in exchange for reducing the cash saving. The other way is not allowed. I.e. you can put £10,000 in stock/bond ISA and £2,280 in cash but not £10,000 in cash and £1,280 in stocks/bond ISA.

So, Why Would You Want It?

The big advantage of cash isas available in the UK is that you can compound your tax-free interest and thus grow your savings a lot more over time.

Cash ISA accounts can be different just like the normal savings accounts. You can have fixed rate bonds for example or notice savings accounts.

How Much You Can Earn?

This isn’t the typical high yield investment I am after here in this blog. Finally cash ISAs are just saving accounts. In most cases you can expect yearly ROI of about 3% – 4% but sometimes it can go over 4%.
But of course this comes with much higher security of your savings.

So if you live in UK make sure to use this opportunity as part of your investment portfolio. Investing in cash ISA does not exclude other investing vehicles, it just complements them. By having parts of your funds growing slowly and securely you can figure out more risky investments for the rest.