Savings Newbie - Some Help Please?

hellohello_2

Hi All, i'm 22 years old and have just started a new job (only £15k a year, have to start somewere) and I'd like to start saving, I don't really have any outgoings at the moment (bar phone bill and car insurance) so I think it is the perfect time to get myself some proper savings started. I've been reading through MSE about the different types of ISA's and the different types of savings accounts, but I can't make heads or tails of it really!

I'm currently with Natwest and I have a student account with them (which is knee deep in the overdraft atm, working on paying all £1500 of that back now that I have a job). I have just opened an e-savings account with them which has 2.1% AER + 2.3% AER for the first 12 months, making it 4.4% AER. After 12 months I'll most likely look at changing accounts to somewere different.

I'm looking to deposit between £200-£300 a month. I currently don't have any ISA's or savings elsewhere, but am looking to build up for the future really whilst I don't have much outgoings etc.

Whats the best way to go about saving £200-£300 a month? I've read about drip feeding into different accounts but don't fully understand it. Also, would I have been better opening one of the Barclay regular saver accounts which has a 6.00% AER (or 7.25% in some cases?)
Sorry for all the questions but I know a lot of you on here are veteran savers and know how/where to save your money, so if anyone could impart any of their knowledge onto me i'd be hugely appreciative!

Thanks!

savingpennies

Personally, I would pay off the overdraft first. The charges on that will probably be higher than any interest you could get on a savings account. Once that's paid off open an ISA, any interest is tax free and remains tax free as long as it is kept in an ISA.
Good luck and nice to see you want to start the savings habit. When I got my first job my dad and my uncle sat me down and talked me into saving 10% of what I earned. God bless 'em both - apart from marrying my DH and having the kids it was the best thing I've ever did and 24 years later I'm still doing it.

Lokolo

As above but I highly doubt there will be interest on the overdraft.... as you are a student. I assume its 0%?

If so you want to start with ISAs, only because when you are a tax payer the interest will still not be charged tax.

Drip feeding is used when you have a lump sum, not for a regular amount.

You can usually get better rates for regular savers but if you miss a payment you usually have some sort of thing whereby you won't get 3 months interest or something. If you don't know if you will definately be able to pay that amount in each month then start with an instant access ISAs.

Rates aren't too good at the moment because of the economical climate but meh.

gozomark

Rates aren't too good at the moment - 4% odd over the next year when inflation will be close to zero is really good

Lokolo

gozomark wrote: »

Rates aren't too good at the moment - 4% odd over the next year when inflation will be close to zero is really good

Yes but inflation isn't 0% at the moment is it?

Yes next year, I didn't say next year. I said at the moment

gozomark

the interest rate is paid over the next year not now....

The_Fiddler_2

Are you sure about the AER?

hellohello_2

Yes the overdraft is a student overdraft so it's 0%, i've finished Uni now though so I want to get that paid off and the overdraft removed from my account indefinately.

4.47% AER (variable), including 2.10% bonus

Earn an extra 2.10% for 12 months
That's on top of 2.30% AER (variable) – giving you a combined rate of 4.47% AER (variable).

Thats what I've just signed up to with Natwest. The online e-savings account.


So do you think I shouldn't bother with my e-savings account that i've opened with Natwest and go straight for an ISA? I wanted to try and keep it all with the same bank, just for ease of use and convenience, but it appears if I want the best rates i'm going to have to be prepared to open accounts elsewere (as Natwest's ISA options don't look too enticing!)

Lokolo

hellohello wrote: »

Yes the overdraft is a student overdraft so is 0%.


So do you think I shouldn't bother with my e-savings account that i've opened with Natwest and go straight for an ISA?

Yeh if you are keeping your savings for a while.

You could open an e-savings along side it and keep some money in that, so when your free overdraft expires you can pay that back.

hellohello_2

Lokolo wrote: »

Yeh if you are keeping your savings for a while.

You could open an e-savings along side it and keep some money in that, so when your free overdraft expires you can pay that back.

Thats a good point actually, aswell as saving with an ISA, i'll try and save in my e-savings account, so when the time comes for Natwest to ask for the OD back, I can pay it all back, and have been earning a little bit of interest on it aswell!

But I ideally want to just build up my savings, i'm not saving for anything in particular, I just figure there is no harm whatsoever in saving money now whilst I don't have any substancial outgoings such as a house, new car etc!

Theoretically speaking, after saving £250ish a month, I should still have enough to live on, pay for going out, car insurance, phone bill, holidays etc. Hopefully I can increase how much I save per month further down the line as I progress through my job/career and my pay increases (what i'm hoping for anyway!)

So can anyone recommend a good ISA for me to start with, not too fussed about withdrawals because I shouldn't be needing to make any.

flossy_splodge

Do you also have a student loan?
If so, don't forget that you're very near the earnings level where you will be required to start making payments against the loan.
I only draw your attention to this as you would be well advised to take this into account if committing to any sort of regular savings where there are penalties for NOT making a payment.

If you read through all Martins advice, he always says 'pay off your dearest debts first'.
But if your overdraft is still 'free' as a post grad account, then leave it alone and earn money in a savings account.

Can I also suggest that, particularly in this economic climate, make sure you can access a MINIMUM of 3 months expenditure at all times in case the worst came to the worst.

Check ALL providers for rates on Cash ISA's. Some, such as M&S don't often appear in the comparison charts but have frequently been right up there for good rates.

Well done you, good habits learnt early should stay with you for life - I applaud you.
And Good Luck.:T