Confused how to get max return on £8K savings

wewe

Hello,

Got the money saving bug too!

I've got some money saved up in an underperfoming account, the return is very low compared to whats on the market, I'm thinking of closing this account down in favour of a new one, but have not yet spoken to the bank themselves to see if they offer something a bit more competitive.

for the time being I'll be able to save around £100 - £200 on top of 8K

but seeing lots of deals on this site and others have left me in a state of confusion.

So far I've opened a Regular Saver account which has a high interest rate but thats all.

I have reserves already but need the flexiblility of withdrawls, can someone please help a noob out, thanks

Tom_Jones

Use your ISA allowance, and put the rest in an account like Icesave or K Edge or any other reccommended accounts

LongTermLurker

First thing is to look at setting up an ISA. I know you said you need easy access, but would you need instant access to everything? You could put £3600 straight into the highest 1 year fixed rate ISA you can find, then put the other £4400 into a Kaupthing Edge 1 year Fixed Term Deposit @ 7.15% and save £200pm into the Kaupthing Edge 6.5% Instant Access account - if you are worried about locking so much money up, you could split the £4400 between a combination of 6mth and 12mth bonds with KE (maybe 2x 6mth bonds, allowing you to recover half the money without compromising the rate on the other half, while still only locking it up for 6 months?)

The world's your oyster

wewe

Good stuff, thanks for the info, I'll look into Kaupthing Edge, it'll be even better as I'm Tax exempt, being a student

LongTermLurker

wewe wrote: »

Good stuff, thanks for the info, I'll look into Kaupthing Edge, it'll be even better as I'm Tax exempt, being a student

Cool - don't abandon ISAs though; you've enough money there to be looking beyond your student years - if you use your ISA allowance each year, you can be sure you'll never pay tax on that part of your savings until you need to withdraw it. If you keep it up long enough that may be when you retire

wbafcben

I had the exact same view as wewe with regard to ISAs, but you've made me reconsider LongTermLurker! If you kept maxing your ISA allowance each year, does it increase cumulatively i.e. £3600 this year, £7200 next year etc. ? Then I see your point about looking beyond student years as this could be a better investment for the longer term.

LongTermLurker

wbafcben wrote: »

I had the exact same view as wewe with regard to ISAs, but you've made me reconsider LongTermLurker! If you kept maxing your ISA allowance each year, does it increase cumulatively i.e. £3600 this year, £7200 next year etc. ? Then I see your point about looking beyond student years as this could be a better investment for the longer term.

Um, depends what you mean.

2008 - save £3600 bal = £3600 + earn £226 interest
2009 - carry over £3826 and save £3600 = £7426 + earn £467 interest
2010 - carry over £7894 and save £3600 = £11494 + earn £724 interest...

After 3 years you have stashed away £10800 but have accumulated £12218 = 11.61% increase. By the end of year 4 you are up to £16814

Examples done very basically using a 6.3% interest rate each year. It isn't intended to be a financial guide, just an indication of the benefits of compounding.

fablad75

It's definitely useful for the long term. You're not going to be a student forever so having a big tax-free pot that's constantly growing is going to be very handy when you're working.

The ISA scheme's been around for quite a few years now. I'm really kicking myself for not having started sooner.

LongTermLurker

fablad75 wrote: »

The ISA scheme's been around for quite a few years now. I'm really kicking myself for not having started sooner.

Yes, it's easy to look at the tax benefits for one year and think "it's not really worth it" but when you look at an example like the one above, it soon makes a difference