Best place to put some money...

jamief

My partner and I have some money (circa £7000) that we'd like to put into savings for the time being - essentially it won't be used, but we may need access to it in an emergency.

We will also have about £20,000 to save in the next 2-3 months, once our house sale completes.

I thought about splitting the £7k between our ISA allowances, but this will presumably tie them up for the next 12 months? Would I be better waiting until after April for that? And what about the £20,000? We could tie that up for 6 months at a time.

whu

jamief wrote: »

I thought about splitting the £7k between our ISA allowances, but this will presumably tie them up for the next 12 months? .

You don't have to put it into a fixed ISA so you can withdraw it at any time - assuming you are both tax payers using your ISA allowances of £3600 each would seem a ggod idea - you could use this years allowances (expires april 09) and then add to it with next years allowances when you get the £20000

jamief

Thanks - so if we put the £7000 into our ISAs this year, we could still fill an ISA next year? (i.e. we could put £7000 into ISAs this month, then open new ISAs next month and fill them too?)

whu

Yes thats right bur remember the allowance is £7200 between both of you each tax year

johncolescarr

First thing to consider is whether you have any debts. Often, paying off high interest debts almost always yields more return than if you saved the money. The only exception to this is if you need to build up an emergency fund, but even so, if you have access to credit (assuming that your credit is suddenly revised by your lender than sometimes happens in exceptional cases) this can be considered an emergency fund.
Once you have cleared high interest debts, then the first place to save money is in an ISA, either fixed term if you don't think you will need access in the short term, or instant access if might need the cash. However, once you have filled your cash ISA limit for that year (for 2 its £7,200) you cannot add any more, even if you withdraw some cash - essentially, you cant pull it out and pay it back in again.

If you have not used this years ISA allowance, take one out immediately and fill it up, then fill next years with some of the 20k you have made on your house, if you wait till April, you will loose this years allowance
If you fill your ISAs, I'd go for a regular savings account.

If you have a mortgage, then it is also worth considering overpaying (essentially a mortgage is just another debt) if you can do so without penalty. This will save you a fortune over the life of the mortgage if you still have a reasonable term left Even if your "normal" ie non ISA accounts appear to yield a higher interest rate than your savings, remember that you will pay 20% tax on the interest for a basic rate payer, or 40% for a higher rate payer, so it may be more beneficial to overpay the mortgage than save.

Hope my ramblings help and forgive me if you are debt free without a mortgage, sadly most people aren't in this lucky position