More than eight million of us pay into cash ISAs each year. But are they worth the effort?

With interest rates so low, pretty much all savings are in the same boat. To mix my metaphors, they are not sinking, but they are not exactly motoring along.

But one thing we have learned over the last year is we don’t know what is around the corner and having a cash buffer is vital. And one thing about cash ISAs is they are sheltered from the taxman forever. This means you could move that cash into a stocks and shares ISA later and it would still be tax-free.

So what kind of interest rates are cash ISAs paying out? As is expected, the longer you lock your money away, the better rate you will get. Locking away for seven years can get you an interest rate of 1.25 per cent if you put away at least £1,000. Yes, I did say seven years! If you go for just five years then there are cash ISAs paying above 1 per cent. Unfortunately most cash ISAs are paying well below inflation. But as a fiancial planner we believe having savings is vital (once you have paid off the debts of course.)

So although cash ISAs may be paying very low rates of interest, they are still worth investing in. Having emergency funds set aside of at least three to six months is an essential cornerstone of any, and every, financial plan.

But shop around, compare the rates and the terms and conditions and do what is right for you. Are you likely to need the money in a hurry? In which case locking it into an account might not be a good idea. We all have unique needs with our money and how we need it to work for us, so planning and doing research is vital.

And if you need any help, you know where we are. Please do get in touch.

No individual investment advice is given, nor intended to be given in this article and liability will be accepted in respect of any action you may take as a result of reading this article. If you are unsure you are urged to take independent investment advice.