When it comes to where to put your savings, there are lots of different options available, and it can be hard to choose which is best for you.
For most of us, an ISA (Individual Savings Account) in some form is usually a good option.
There are two main types: a Cash ISA and a Stocks and Shares ISA. I think of an ISA a bit like a Tupperware box: you fill it with either your cash or shares, put the lid back on, and the taxman can’t get his hands on what’s inside.
Types of ISA
Cash ISAs are, you’ve guessed it, held in cash, while Stocks and Shares ISAs are invested.
Each year, you can save up to £20,000 across your ISAs. This can be all in one ISA, or across a Stocks and Shares ISA and a Cash ISA. The main thing to remember is that the limit across all of these accounts must be £20,000.
This resets in the new tax year, so you get another £20,000 limit to use up until the following April. Anything you don’t use is gone – no rollovers.
From April 2027, the government is changing the Cash ISA rules, so that you can only put in £12,000 per year into one. You still get the £20,000 limit across all your ISAs, you’d just have £8,000 left over to put into a Stocks and Shares ISA.
Which ISA is right for me?
Choosing the right one depends on what you’re saving for, and how long you can go without needing to dip into those savings.
Most financial experts will recommend you hold around three to six months’ salary or income in cash as an emergency fund, in case your boiler breaks, you lose your job, or anything else unexpected crops up where you might need some accessible cash.
You can shop around for Cash ISA rates; the best ones are currently paying well over 4 per cent.
When it comes to saving for something bigger, like a property deposit, it all comes down to timeframes. If you’re looking to buy within three years, it’s best to keep your savings in cash. Stock markets are volatile – they will have bad periods and the main thing is to avoid being a forced seller when things are low.
However if buying that flat is still a way off, you could consider a Stocks and Shares ISA, as the market is likely to give you higher returns over time than most savings accounts. The longer you have to ride out any market downturns, the better. Over five years, stock markets are likely to do better than cash. In the UK most of us are too risk averse and so actually lose out from the greater earnings potential of the stock market.
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Geopolitics in 2026 are a good reminder of market volatility. Investors can take collective fright at the news and markets can move sharply south. Things typically recover over time, but the key thing is you don’t want to be forced to sell right at the point when things are rock bottom!
Don’t forget the LISA
One other thing to consider: if you are a first-time buyer aged under 40, a Lifetime ISA (LISA) is also a great way to accelerate your savings. You can save up to £4,000 a year, and the government will give you a bonus of 25 per cent on top of whatever you raise, up to a maximum of £1,000.
However, these accounts are under review so do keep an eye out for changes.
It’s also worth noting that you could incur penalties if you need to withdraw the money for anything other than a property deposit or retirement, so make sure you’re aware of these Ts and Cs and are happy to lock your money away for this specific purpose.
I personally keep my short-term money in cash. And then I have longer-term savings and my pension fully invested in the stock market. I know things will go up and down but over the long-term it’s served me well.
If you’re still not sure, or you have multiple savings goals, you can always hedge your bets and put a little in both! The rules allow you to have both a Cash ISA and a Stocks and Shares ISA on the go at the same time – or even more than one of each if you want.
When investing, your capital is at risk and you may get back less than invested. Past performance doesn’t guarantee future results.