Short Term Savings Advice Needed, Please

LavenderBees · 20 November 2017 at 9:44PM

Hi All

I'm struggling to work out what would be best to do, and would appreciate fresh eyes and minds on this, if you don't mind! I am hoping that typing this up will also help me!

I have no mortgage (paid off 3 years ago) and pay into a pension via my employer. I have a closed ISA paying 1.35% on around £23k. This is my never to be touched security blanket, but I know I can get better rates if I transfer it...I just feel uneasy about taking out a 5yr fixed deal at 2% (I could end up needing the money or not being able to take advantage of a better rate), and the 2 to 3 years don't offer much more than I am currently getting. Still, I guess a 2 year at 1.5% is better than 1.35%...I have to give 90 days notice on my current ISA.

Since I paid off my mortgage, I have been concentrating on home improvements, but the risk of redundancy after a company takeover is ever present. I have dodged the bullet a few times in the past, and may dodge it yet again, but I feel uneasy.

I know I am not making the best use of my disposable income with regards to a personal account and savings. But I can't decide what is best to do...I currently have a Santander 123 account with a general balance of £7k - this is what I use to build up savings to pay for any holidays, home improvements, day to day expenditure. The £5 account fee eats heavily into my interest and paltry cashback. The last few months I can see I only gain around £8.

I also suspect that, because my "everyday" savings are in my personal account, that I am spending more than I really need to. I have worked out that I can easily manage on less than half of my monthly income which still gives me a contingency fund and would leave around £1250 per month for saving.

Given I have job security concerns that may or may not be alleviated in the next 12 mths, can you give me any advice how to approach use of my personal account and savings. Any redundancy pay would be the minimum - I estimate around £12k and I would need to live off this as well as fund a car until I found another job. I reckon redundancy would be towards the end of next year if it happened.

My head is done in with all the different deals and I can't see the wood for the trees any more. So any advice will be gratefully received.

Many thanks

LB x

Eco_Miser · 21 November 2017 at 1:49AM

Set up a number of Regular Savings accounts to take £1250 each month just after payday. See the lists in posts 2-8 of Regular Savings Accounts: The Best Currently Available List! Most of them allow easy access without penalty, so if you really need the money there's no problem, but you can't just spend it without thinking.

The best savers need another account with the same bank, some of which are also worth having in their own right, such as Nationwide's FlexDirect and Flexclusive RS, both paying 5%.

LavenderBees · 21 November 2017 at 12:50PM

Thanks, Eco Miser.

I was looking at regular savers last night, but couldn't get onto the Nationwide site. I have done so now, and opened the current account.

So, that gives me access to a current account with 5% interest on £2500 and a regular savings account of 5%

I also have opened a 5% regular saving with Santander, too

Having researched Cash ISAs, I have opened the Skipton one for 5 yrs at 2% on the basis that if nothing better shows up over the next few years and I don't need the money urgently, then 2% is better than 1.35%. I can withdraw the capital should I need to with loss of interest (naturally).

I'll take a look at the other regular savings accounts but struggled last night to work out if it is actually better to have a regular account (more interest, but obviously money is being drip fed in so the higher interest is on less money for a while). Or would it be better off just a normal savings account with all the money transferred in asap but on lower interest rate. I guess the answer is that I won't have the money available all at once so will need to drip feed it, and best to get it out of my current account where it can be spent.

Just writing things down has helped clarify the way forward for now for me :T

LB x

Eco_Miser · 21 November 2017 at 3:09PM

While it obviously depends on the rates available, a good Regular Saver beats everything else for the money in it. You can always dripfeed from a normal savings account to a Regular Saver, thus getting the best of both worlds.
The comparison between a fixed term, fixed rate account and a RS can be more difficult. You can calculate exactly how much interest each option would earn, but then there's the possibility of rate changes making the fixed term account a poor return, and the value to put on easy access.

LavenderBees · 21 November 2017 at 3:18PM

Ooh...hadn't thought of drip feeding from another savings account. Thank you for that! :j

Short Term Savings Advice Needed, Please

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