They are also flexible and most of them offer instant access to your savings. They can therefore be used to -

• Save for the long-term
• Save for a purpose, perhaps to buy a new TV or Car, or
• Just to save for an emergency - See what is an Emergency Fund
• You are in control of your money with a Cash ISA and so you choose how to run your account

Note, that there is another style of ISA called a Stocks & Shares ISA which as the name suggests is for investments rather than cash. We've got a detailed page describing them here.

The minimum amount to invest in a Cash ISA is usually no more than £10 which makes them suitable for all savers.

An important point to remember with a Cash ISA is that once money has been withdrawn it cannot be then replaced later in the year. For example -

The simplest form of a Cash ISA account.

They work just the same way as a traditional deposit/savings account except the interest generated is tax-free. Some of these accounts even offer Cashpoint cards. The interest rate is variable which means it can change both up and down alongside the movement of official interest rates.

Shop for the best deal because some providers offer miserly interest rates compared to their competitors - See Top 3 Cash ISA accounts - Updated every Monday.

A fixed rate ISA is where the interest rate is fixed for a period of time, usually 6 months to 3 years.

Note that a fixed rate deal will always mean that your money is locked up for the term and instant access is not an option.

So if you deposit say £2,000 at a rate of 4% for 1 year, it is impossible to access that money until the year end. Very occasionally it is possible to access your money but there will be a hefty financial penalty to pay, sometimes over 50% of the total interest.

Fixed rate ISAs should therefore only be considered by those who do not need access to their money at short notice. People with large ISA savings often lock up a portion of their money, say 25% - 50%, in a fixed rate deal and then invest the balance into instant access ISAs

Also, fixed rate savings accounts, whether ISAs or not, normally work well when interest rates are expected to fall. Conversely when interest rates are very low, rising or expected to rise they are normally best avoided.

• See Top 3 Cash ISA accounts - Updated every Monday

You are in control so if for any reason you want to stop the monthly deposits just cancel the direct debit.

If you already have a Cash ISA then keep an eye on the interest rate as banks have a nasty habit of reducing them, even when official interest rates don't move lower.

For example, an ISA account pays a headline grabbing interest rate today, but a year later it's uncompetitive compared to the rest of the market.

If this happens look to transfer your cash to a different ISA provider.

Note however that some ISA accounts only allow new money and not what they call transfers in, ie you can't transfer any ISA money from an existing account which you have built up previously.

This is why people who've been paying money into ISAs for many years often have 2, 3 or even more different Cash ISA accounts.

There is an argument that if you've got small savings, say under £1,000, the tax-free aspect will hardly be worth it. True, but the account opening procedure for an ISA account is no different to that of a standard deposit account so it's not as if it's going to take any more time or hassle.

Finally, the real trick with ISAs is to try to think long term and aim to build your cash savings over many years. If you can do that the tax-free advantage really starts to shine.

Now you've got a good idea of what Cash ISAs are why not find out more about Stocks & Shares ISAs.