Savings tips please!

Money_Saving_Mark

Hi all,

I'm basically looking for some tips on how I can grow my savings. I don't really have any particular aims as to what I'm going to do with it, I just want to have a good nest egg for the future.

Here's my situation: I'm 23, I have no dependants, I have no debt other than a student loan, I live in rented accommodation and I earn considerably more than I need to survive.

I have around £11k in ISAs, I put £3000 away 5 years ago in Intelligent Finance ISA (not sure the balance of this now) and have managed to save the maximum £3000 every year since I graduation from university, and that's gone into an NS&I ISA (currently about £7,700). I know it's not the best rate but the convenience of opening and running the account makes up for it for me. I expect to be able to save the maximum amount every year for the foreseeable future.

I'm lucky to be in a relatively secure and stable situation, and I'm considering my next move. Obviously as I'm young my circumstances can and probably will change in the next few years, but I'm looking to get the most out of the money I have saved. Unfortunately I have no experience with anything beyond an ISA and I don't really have much of an appreciation of the options available to me.

I've been considering seeing an IFA but I have no idea how to go about doing this or how much it would cost. I'm also considering investing in stocks (I hear the interest rate over the long term is better than any ISA rate), and would prefer an ethical investment.

With the credit crunch and the fallout from that, is this a good time to invest?

Any other tips?

Thanks!

Mark

unhealthyman

I'm in a pretty similar situation to you. I've got similar amounts of money squirrelled away in ISAs and tend to get paid more than I can spend.

Unless you really prefer the lack of hassle and the dependability of the NS&I ISA you would be better off moving it to another provider. At the moment, Natwest/RBS offer the best option which gives you 6.5-7.2% (depending on how much you have) and this offer is only for money transfers. (Bear in mind that the good rates are due to a temporary bonus which expires after a year.) Here is the MSE article on it: http://www.moneysavingexpert.com/savings/cash-isa-transfers

Apart from that, the next sensible step would be to have a savings account and just put money into that.

You definitely don't want to move money out of ISAs to invest elsewhere. If you get an ISA paying 6ish%, this rate is the equivalent to getting 8ish% on a taxed savings account. No other places will offer you a reliable year on year return of 8%.

Before you start dabbling in stocks/shares, you need to really ask yourself what you want to save for. If you have any likelihood of needing the money within the next couple of years, you probably don't want to consider shares.

The credit crunch is far from over, and the world of finance is very shaky at the moment. While this may, in time, offer an opportunity, at the moment even the most optimistic investors are running scared. I would give it a while to just see what happens with the banking crisis before putting money into the stock market, but if you are feeling confident or adventurous - by all means put money in. I would hazard a hopeful guess that you could see a good return in 10 years. But if you think there is a possibility of needing that money in the next couple of years (i.e. as a deposit on a house) then you will quite possibly see a loss.

If you do want to get into stocks and shares, I would go for some kind of unit trust index tracker, tracking the FTSE. That means that when (if) the FTSE bounces back you will see the benefits and it reduces the risk you are exposed to from individual shares/companies going bust. You can invest in one these through the remaining 'shares' half of your ISA. (The total ISA is £7200, half can be in cash, the rest has to be investments.) If you pay regular payments rather than investing lump sums, it will also mean that you aren't as exposed to daily fluctuations.

As far as IFAs go, they are not a bad idea, especially if you are really making more money that you know what to do with. They often charge an initial fee, but the bulk of their money comes as commision from handling your money - they will take a yearly %.

Money_Saving_Mark

Thanks for the advice unhealthyman, it's useful to know I'm largely on the right track! I forgot to mention I do have a savings account that acts as a kind of piggy bank for money that eventually gets put into an ISA. It's also useful for money that I expect to have to pay as tax (I have done some self-employed work recently).

Transferring ISAs seems like a pretty big hassle, I did open an account with icesave about a year ago but never got round to finding and sending off all the paperwork, it looks now like this was probably for the best! I'm put off that RBS/NatWest one a bit because I'll have to transfer it in, and then a year down the line transfer it out again.

Looking at that article it seems the post office one has a bonus which would end after a year too, although the principality one looks a good bet. Am I right in thinking that as I've already put some in this year it is not worth switching until the next tax year?

Baldur

Money_Saving_Mark wrote: »

Am I right in thinking that as I've already put some in this year it is not worth switching until the next tax year?

You can transfer to a new Cash ISA provider at any time, it's no hassle - just complete the new provider's transfer form and they organise the transfer, which *should* take no more than 30 days. You can subsequently subscribe any balance of the current year's allowance after the transfer is complete

Money_Saving_Mark

Thanks for the advice unhealthyman, it's useful to know I'm largely on the right track! I forgot to mention I do have a savings account that acts as a kind of piggy bank for money that eventually gets put into an ISA. It's also useful for money that I expect to have to pay as tax (I have done some self-employed work recently).

Transferring ISAs seems like a pretty big hassle, I did open an account with icesave about a year ago but never got round to finding and sending off all the paperwork, it looks now like this was probably for the best! I'm put off that RBS/NatWest one a bit because I'll have to transfer it in, and then a year down the line transfer it out again.

Looking at that article it seems the post office one has a bonus which would end after a year too, although the principality one looks a good bet. Am I right in thinking that as I've already put some in this year it is not worth switching until the next tax year?

Money_Saving_Mark

Baldur wrote: »

You can transfer to a new Cash ISA provider at any time, it's no hassle - just complete the new provider's transfer form and they organise the transfer, which *should* take no more than 30 days. You can subsequently subscribe any balance of the current year's allowance after the transfer is complete

So would they transfer the previous years' allowance and leave the current year stuff alone? I understand you can't contribute to two separate accounts in a year?

Baldur

Money_Saving_Mark wrote: »

So would they transfer the previous years' allowance and leave the current year stuff alone? I understand you can't contribute to two separate accounts in a year?

1. You can transfer the whole ISA funds

OR

2. Transfer all, or a partial amount of the previous year's/years' funds (if old provider & new provider permit/accept partial transfers).

OR

3. Transfer the current year's funds - but they must be transferred whole.

Transferred funds do not constitute 'subscribing' (i.e. paying new money) to an ISA.

amistupid

Well done Money Saving Mark and Unhealthy. It's nice to know that people can leave higher education wealthy, wise, independent and gainfully employed. My "two little darlings have both come home", jobless, up to their eyes in overdrafts and student loans and used my entire disposable income for the last five years. Investing in their future is like investing in Icesave!

Money_Saving_Mark

Baldur wrote: »

3. Transfer the current year's funds - but they must be transferred whole.

Ok, I think the best bet is probably to fill this year's and then transfer. Thanks!

unhealthyman

amistupid wrote: »

Well done Money Saving Mark and Unhealthy. It's nice to know that people can leave higher education wealthy, wise, independent and gainfully employed. My "two little darlings have both come home", jobless, up to their eyes in overdrafts and student loans and used my entire disposable income for the last five years. Investing in their future is like investing in Icesave!

Heh, thanks. I've always been a saver rather than a spender, but I was also lucky in landing a job that more than covered my living expenses.

Money_Saving_Mark wrote:

So would they transfer the previous years' allowance and leave the current year stuff alone? I understand you can't contribute to two separate accounts in a year?

Once you have filled up this years allowance, you can then transfer the whole amount to another provider which allows tranferring in. (Like RBS/Natwest). It is pretty painless - I went into the branch, filled in a form and it was all done in about 10 minutes. Unfortunately I was transferring from my Icesave ISA and they went bust before the transfer could go through. :mad: But nevermind, I just get to play the waiting game for my money now.

But yes - the RBS/Natwest option does mean you would probably want to transfer elsewhere after the 12 months, so if you wanted an easier life you could just try and pick a reliable ISA which doesn't have a bonus. I'd personally like to keep my ISA in one place (at least while it is less than £50000) just because it makes it a lot easier to manage so there are definite benefits in finding a hassle free provider.

Baldur

Money_Saving_Mark wrote: »

Ok, I think the best bet is probably to fill this year's and then transfer. Thanks!

'Whole' in this case doesn't mean the full £3,600, it means that whatever amount you have paid in during the current tax year plus any interest earned on it to date must be transferred in its entirety to the new provider.

You can transfer and then pay in the balance of your current tax year's allowance to the new provider, if you wish.