Totally confused about this Saving Lark!

Amy_L

Hi,

So I have about £6/7000 which I'm thinking of transfering out of an ancient account, into some sort of decent account which can earn me some cash. I'm not really up for risky business so that counts investing out. I was reading the money fountain page, and got confused on about the third line.

I wanted to put the money away for at least a year, with no withdrawals. I'm not sure whether I should be putting it in ISAs or regular savers or whatever.

Can anyone help me as to where I should be putting my money?

TIA

Amy.

latecomer

If you are a tax payer then you should use your ISA allowance first (£3600) and then put the rest into a high interest savings account.

Regular savers normally only allow you to pay in a relatively small amount per month and hence you wont get the headline rate on a lump sum.

Amy_L

Ok, but I'm doing a PhD for the next 2 years, so i'm not a tax payer ... does this matter?

latecomer

Yes.
If you pay tax then you are taxed on the interest you get. ISA are tax free up to the £3600 limit and hence are better for tax payers.

If you dont pay tax then
just look for the highest interst rate available. If you definitely wont need access to the funds then you can go for a notice account (where you have to give notice to withdraw) or a fixed rate bond for a set period. Note that if you do withdraw from some of these types of account you may get a lower rate of interest or even none at all hence its important to know whether you will need access or not.

try reading guide if you haven't already:

http://www.moneysavingexpert.com/savings/savings-accounts-best-interest

talana

Ok, but I'm doing a PhD for the next 2 years, so i'm not a tax payer ... does this matter?

I'm assuming though that one day you will very likely be a taxpayer?
It's still worth saving in an ISA as your money will be earning you interest tax-free year-on-year assuming you don't withdraw the cash again.
2 years from now after your PhD you could already have £7200 + interest already gained sitting there tax-free when you'll be looking for a job I imagine.

debbie42

You may wish to consider the longer term benefits of saving the cash in an ISA. Once it's sheltered from tax, as long as you keep it there then you won't pay tax on the interest. If you start earning more than the tax allowance in a couple of years this might be an attractive option.

edit: talana, you're a faster typist than me :-)