Where should I put my savings right now? Best options if you have £1,000, £5,000 or £10,000

RECORD low interest rates and the unpredictable stock market can make it hard to get a decent return on your money.

Here are some places to consider putting your hard-earned cash so you can build an effective savings or investing pot.

Households are suffering from paltry returns on their savings and most products struggle to beat the level of inflation.

This means you are effectively spending more on the cost of living, such as your bills, then what you are earning on your money.

The best easy access savings account rate is currently 0.65%, according to Moneyfacts.

You can earn 2% if you are willing to lock up your money for five years in a savings account.

Neither of these come anywhere close to beating the current inflation rate of 3.2% and there are warnings that this figure will get higher as the supply chain and energy crisis push up costs.

Any money earning below inflation is effectively in a negative return but as inflation rises, it becomes even harder to get a decent level of interest to match or beat the cost of your rising bills.

An alternative is investing, which puts your money to work in the stock markets either through a general investment account or Isa.

Here are some of your options.

Saving versus investing

Saving money generally refers to putting cash aside.

This could be in an easy access account where you can withdraw your money at any time or a fixed term account that locks your money away for one to five years and pays a higher rate depend on the length of the term.

A savings account will pay a fixed rate of interest but it can be hard to currently find deals that beat the rate of inflation.

There aren't usually any charges.

Your money is protected by the Financial Services Compensation Scheme (FSCS) up to £85,000 if the savings provider goes bust.

Investing puts your money to work on the stockmarket by investing in company stocks either directly through shares or with a fund manager.

There is more risk involved as the value of shares can go up and down but the returns tend to be higher than a savings account over the long term especially if you build a diversified portfolio.

Don't forget to factor in investing charges which can reduce your returns.

There is also FSCS protection if your investment provider goes bust but that doesn't cover the actual performance of your portfolio.

What to do before you start saving or investing money

It is important to make a plan so you are using your money effectively.

It may be worth opting for a savings account if you need access to your money over the next year or so.

But if you can wait then it may be worth investing as you could earn a higher return over the long-term.

Consider how much you can afford to save, what you need for your goals and how long it would take to reach it through saving or investing.

Experts also suggest having a rainy day fund of cash set aside for emergency of usually three months of expenses.

What to do with savings?

There are few choices when it comes to your savings.

You could open an easy access or fixed term savings account.

Everyone gets a personal savings allowance of £1,000 that they can earn in a year, £500 for higher rate taxpayers.

Find out how to find the best savings account for your money our guide, plus check out the tips below.

How to save £1,000

Some of the best savings accounts require a minimum deposit of £1,000.

So your £1,000 of cash could be used to access some of the best savings rates on the market.

It could also go towards your Isa or Lisa allowance.

How to save £5,000

A £5,000 sum could max out your £4,000 Lisa allowance and leave £1,000 to put into savings or to invest.

How to save £10,000

A £10,000 pot gets you halfway towards using your Isa allowance.

It is a lot of money to put away so make sure you have enough left for expenses.

Also consider the best use of such a large sum. Is it worth putting it in a savings account to earn a rate below inflation, or can you afford to invest in the stock market and aim for a higher return? You would need to be willing to stay invested for at least three to five years.

With all these figures, your best option will depend on your saving or investing goal and how long you are willing to wait.

The taxman also gives savers and investors a £20,000 individual savings account (Isa) allowance.

This is an allowance you can put into an Isa and earn any interest tax-free.

You could open a Cash Isa, a stocks and shares version or spread your allowance across both.

Find out more about how to find the best Cash Isa.

Should I get a Lifetime Isa?

Another form of Isa is a Lifetime Isa.

This lets anyone age 18 to 39 save money and earn a government bonus that can be put towards a house deposit or your retirement savings.