Savings and new bank account

madirishwomen

hi

New to site so sorry if i've repeated what is already here

Im 7 months pregnant and really trying to get my life together - finance wise!! My husband is on good money but im self employed (only started business last year). Business going in right direction but we do have loans and cards!!!!

I need to set up an account that all my maternity money goes into so we manage that correctly and starting off fresh. I also need to set up an account for savings which I plan to pay back a loan with in 2 years. The loan is for 10,000. i know I need to be putting alot into this account but at the mo I dont have it. I would love to start by putting £100 in each month with the flexibility to put more in but dont want to be told to put more in that I dont have.

Can anyone point me in right direction??
Thank you!!

anandp

Hi,

Welcome to the forums! I'd be happy to help as I'm sure would other regular posters on here.

The best way to look at this is to look at all your current bank accounts (current accounts and savings accounts) and list them by the interest rate you're getting on each.

Secondly, list all your debts - cards and loans - and list them by the interest rate too - but as you're paying interest on these and NOT receiving interest, put a minus sign before the rate.

E.g.

HSBC savings account = +3.50%
HSBC current account = +0.01%
Barclays loan = -8.9%
Egg credit card = -12.9%

Now the above are in order. The rules, in order of importance are:

1) Have as little money in the minus accounts as possible
2) Have as much in the plus accounts as possible

Now let me put some fictitous numbers in the accounts above.

HSBC savings account = +3.50% +£3500
HSBC current account = +0.01% +£8000
Barclays loan = -8.9% -£700
Egg credit card = -12.9% -£2500

Using the rules above, my first priority should be to reduce the Egg credit card and Barclays loan amounts immediately.

I would take £2500 from my HSBC current account and pay the Egg credit card off in full. Secondly, take another £700 out and pay off the Barclays loan in full.

Any remaining balance now falls under Rule 2 - i.e. all negative interest accounts have been paid off, and now only positive interest accounts remain with balances.
Put all the cash in the highest earner to achieve best results.

Now I know the above may not be exactly what you're after, but I hope it helps. My next post should be more specific to your actual circumstances.

anandp

You say you want to create a savings account to be able to pay your loan off.

I'm not sure why you need a savings account to do this. It may be better to set up a standing order (which you control) to pay regular amounts towards your loan.

So if you want to pay £100 a month towards paying off your loan, set up a standing order with your bank to do this. If in the future you want to pay off more, simply amend the standing order - and if less, then the same applies.

As its a standing order, you control the payments.

It would be better (and more efficient) to pay via a standing order than to put money into a savings account first and then pay towards the loan.

I hope this makes sense - feel free to ask any questions you may have.

madirishwomen

Thank you for your help. I wish i had those amounts in my accounts. I need a seperate savings account as its a family member I owe and they dont want the money back for 2 years. i want to set up new account to start fresh as my accounts dont ever look good as im always in overdraft. I never have savings as dont have spare cash as alot of bills which Im trying to sort.

Prob is really being self employed, noboby will lend you especially not in first year of business. I never understand the rates banks give me either. Is there a certain rate for savings and current accounts I should be looking at?

Appreciate your advice

anandp

For current accounts. few of the banks or BS's give interest rates above 0.01%. Nationwide FlexAccount is a good one to go for if you've got a steady stream of income coming through every month.

If you paid in £1000 or more each month, you'll receive 3.5% interest with them.

For savings accounts, you should look at at least 6% interest per year though there are some paying more with different conditions attached. Best way to know is to use the main site's Banking/Saving guides to guide you.

madirishwomen

Thank you!

SKIPPY

Alliance and Leicester pay 8.5% interest on their Premier Current Account. You have to pay in at least £500 each month. http://www.alliance-leicester.co.uk/current-accounts/premier-direct-current-account.aspx?ct=CASecondaryRightpremdirect