£25K to invest for school fees

tidyfinance

Hi, I have just remortgaged to raise £25K for my son's school fees.
I now have a cheque waiting to be housed in the best rate account I can find. My criteria obviously has to be that I need to make 3 withdrawals per year (£2345/withdrawal).
Anyone know of the best account in which to house this money that will give me a good rate of return please?

dunstonh

Investing wouldnt be a good idea. Picking a savings account would be better. Although you could split it and put some of the later years money into ISA/Unit Trust/OEIC depending on your risk profile.

tidyfinance

Savings account will probably be the way I go.
I've been trawling the internet with Cahoot looking good, but would it be wise to go for an initial 'good' % rate that drops after 6 months, and then a further drop after another 6 months? I have no qualms about moving the money around after time, just really need to get maximum interest from it.
One thing is for sure, this cheque is doing no good stuck in a drawer!!
Anyone out there gone through a similar exercise?
Thanks for the reply.

tidyfinance

I reckon I'll put £3K into an ISA now, and put 3 more before next April.
Keep doing £3k per year with the main balance in a high interest savings account that allows me access.
Does this sound sensible to you?

tomstickland

Fill your £3K mini cash ISA allowance each year. One now, one in April. Actually, I don't know whether you can take out two mini cash ISAs per year. Someone will no doubt correct me in a minute.

After that you have 5%ish instant access accounts. You could also get moving £250 per month into an A&L reg savers account (10% gross, 7.5% effective over the year if moving from a 5% account).

Rikki

Remember school fees increase at a rate of about 8% a year.

tomstickland

8% pa, can't do that forever though.

Rikki

My fees have gone from £4000+ in 2002/3 to just over £6000 per term in years 2005/6. For one child.

babesandbrats

Rikki wrote:

My fees have gone from £4000+ in 2002/3 to just over £6000 per term in years 2005/6. For one child.

Per term? That seems an awful lot - do you mean per year?

tidyfinance

tomstickland,
what do you mean by 10% gross, 7.5% effective over the year if moving from a 5% account?
This is just the advice I'm looking for. Many thanks everyone for this info. I wan't to try to get this finance right, so comments are really helpfull.

Happy New Year everyone _party_

YorkshireBoy

tidyfinance wrote:

what do you mean by 10% gross, 7.5% effective over the year if moving from a 5% account?

The 'average' balance in the 10% regular saver account is half the terminal balance so the interest can be approximated to 5% of the terminal balance.

The money set aside in the 'feeder' account earns 5% whilst it's waiting to be transferred, so the average balance here throughout the year is half the total amount fed into the regular saver account - so this sum pays an average of 2.5%.

2.5% + 5% = 7.5%

Broadly speaking, if you transfer £100/month (£1,200/year) from a 5% paying account to a 10% regular saver account (with the same provider), the overall interest earned will be £1,200 x 7.5% = £90 gross.