Please help, as a student, how to save??

merten_4_mcguffin

Hi there, I'm a 4th year medical student in belfast. I recently got my overdraft extended to 10 grand (0%!) so I can go on my elective. I don't need all that money so I thought I'd stick some away...and i need advice.

Should I go with a cash isa or a fixed term bond? i've never had money, either have my parents so I don't know much about this. People are telling me I should go for fixed term bond because it's got better rates and I don't pay tax anyway so the isa's benefit is nullified...

also, after letting me know which I should go for can anyone recommend me any? I see that anglo irish has good rates but it's duffed so I don't want to go there...any advice?

cheers

Oldernotwiser

I think that you'd do much better on the Savings board for advice on this issue.

Lokolo

^^ as above.

I wouldn't put it in a fixed rate bond if I were you. They have better rates but if the overdraft gets recalled you are then stuck in paying it back with the savings.

You can get tax free interest (as long as your taxable income is below you personal allowance - £6035 for most this year) by filling in an R85 form. This can be done on normal savings account.

ISAs are good if you are planning on keeping the money longer term and are going to become a taxpayer.

Mike1989

There is the possibility you can take out a Halifax Regular saver. You can put in up to £500 per month at an interest rate of 5%. Remember though you get 500 * 5/100 * 12/12, 500* 5/100 * 11/12, and so on and so forth. Plus you can close the account in question whenever needed, change the amount you pay in each month. Roughly speaking you would make well over £100 in interest over the year.

You could take out an ISA, best rate I've seen to date is Abbey's 2.90% direct issue 2 ISA. ONly thing is you can put in £3,600(?) per year. So if you did it before April, you could put in a further £3,600. So if you went that route you would make £104 interest in that ISA.

So my advice is set up a standing order from your current account to pay £500 per month into a regular saver at the Halifax. You will make more interest than in any current ISA rate and fixed rate bond.

rjl89

One issue is your loan may be recalled, its pretty unlikely but if that happens you'd need to have it in an account you can access straight away so you can pay it back when they ask.

To maximise your interest i'd get a top paying easy access account, paying up to 3.6%, and a monthly saver like the one barclays do, paying 6% fixed for a year.

You can put all your spare cash into the the easy-access to begin with, then gradually move the money you know you wont need into the monthly saver at up to £250 a month. You pay in by standing order so its pretty easy. Even if you needed it suddenly, you still get 3.03% in a month you make a withdrawal from the monthly saver. Try to get as much in as you can in the early months so more of its in the better paying account for longer.

Remember to fill in the form (an R85 i think ) that tells them you dont pay income tax, so you get the interest tax free.

I wouldn't get an ISA, as you'll be paying back the overdraft to the bank when you graduate i imagine, and you wont pay any income tax while youre a student i assume, so you wont gain anything from getting the money into a tax-free account.

whitfreak

A few things, if you've convienced a bank you need a 10k overdraft to do your next year of study do not put it in a fixed rate bond. While the rates are better you can't get at it for the term of the bond (well not easily). So if you need the money for living or they recall the overdraft then your stuffed. Also dont put the full 10k into a saving account, banks are getting more wary of people maxing their overdraft then looking like they've run away (i.e. maxed no activity for months)

I disagree on rjl89 ISA point, as once the tax years gone that years limit has gone. But to be fair it all depends on whether you'll have to empty the ISA to repay your overdraft/bills if so he correct. But if your likely to be leaving a decent amount in there then its worthwhile as it remains tax free when you start earning.