A reader with £10,000 in savings seeks the safest way to earn income without risking their emergency fund. Financial experts advise that for rainy-day money, security is paramount, and better returns are mutually exclusive with safety. The best instant-access cash Isas pay under 1%, below inflation of 1.6%.
One overlooked option is using interest-paying current accounts. Nationwide FlexDirect offers 5% AER on balances up to £2,500 for the first year. Santander 123 pays 1.5% on up to £20,000 but charges a £5 monthly fee. TSB Plus gives 3% on balances up to £1,500 and 5% cashback on the first £100 of contactless spending each month.
These accounts often require monthly funding or direct debit switches. With £10,000, savers may need multiple accounts, but many find it worthwhile. For funds beyond an emergency buffer, investing in low-cost index funds within a stocks and shares Isa is recommended, offering tax-free returns over a five- to ten-year horizon.
