what is best for my money?

pavlovs_dog

i've come again to learn from the masters - maths was never my strong point, so please bear with me if i ask stuid questions, or need simple things explained in idiots terms!

long story short, heres my SOA:

im a student with a loan to save (saving for house deposit). i also work part time, which brings in an extra few £k a year, and more than i need to live on, so i have money to save.

currently, i have just over £5500 saved in a HSBC mini cash isa, and i have filled my allowance for this tax year. with some help from grumbler, i have learnt some rather horrifying news - the interest rate on this account is a measly 4.1% AER. this rises to 4.35 % aer when the account balance is £9k or more. the highest this rate will ever rise to is 4.75% on an account balance of £15K plus - probably not the worst, but not the best either.

i then have an ING account for all surplus savings over and above my isa. this is separated into different pots, the main one being a furniture fund for said house , and this is funded by

a) 10% 'tax' on all earnings at the end of each month
b) any overtime worked, or income from my 2nd job (have recently taken on more hours, which means there is £20 a week dedicated to this aim at least).

it is also currently home to just over £1.5k of student loan from January, waiting to be transfered to an isa in the new tax year, which will be topped up to the full £3k by the end of april




now then!

i want to make my savings work for me as well as they possibly can, BUT

1) i cant commit to huge amounts by regular transfers each months. i CAN do occasional large deposits, regular small (ie fixed at around £20-£30), probably topped up regularly with odd amounts here and there

2) i cannot lock anything away too tightly - i have absolutely no financial support from parents etc, and am paying for my degree off my own back. if the sky falls in, i need to be able to get at my money pretty damn quick

3) if possible, i like accounts that pay interest monthly - it helps stop me spending my nest egg (so far i've been very good and have not touched it once)




with all this in mind (you guys deserve a medal for putting up with me for this long :beer: ) what would you recommend as my best course of action?

have been reading martin's articles, and the halifax/A&L both look quite attractive with their high %AER. would i need a current acc with A&L to open their ISA? and what is this about the bonus - am i right in thinking this is paid in addition to/on top of the standard ISA rate?

does opeing up ISAs/savings account impact my credit rating at all? a stupid question perhaps, but my understanding of such things is limited. i only ask because im trying to build up a good credit rating, and keep it that way to help facilitate getting a mortgage in a few years time. (i dont have, and never have had any debts if that makes any difference )?

and then this regular savings lark - would i be better off putting money in a high interest regular savings account (will have £3k by the end of april), and drip feeding this at £250 incraments a months to my ISA - would this maximise my interest earning potential, whilst still allowing access to my money (product allowing)? and if i do go down this route, what about my ing account - i suppose it makes more sense to put money into a high interest account for the year, milk it for all the interest its worth, and then move it to the ing account?

and one final question - as interest is paid monthly on my current isa, would it be possible for my to transfer my current balance to a better paying ISA in preparation for tax year 06-07? if so,

1)could it ONLY be moved to an account where interest is paid monthly,
2)would i have to forefit a months interest if it goes into an interest paid annually account, and
3) could i move the whole balance of £5500, or just this years £3000? (on the basis of compound interest, i guess the more i can get into the account, the better?)



sorry for such a long and complicated post so early in the day, and for my probably elementary questions, but being young, im still getting to grips with the workings of the big, bad financial world, and really appreciate a more experienced eye over my situation and ideas.


eternal thanks for your time, patience and *hopefully* replies

p_d

HGLTsuperstar

You can transfer your ISA wherever you like, regardless of how interest is paid, and it has no bearing on your allowance for this yr or next, as you're not actually contributing anymore just moving it. But make sure you request a transfer, dont just close your current ISA as this will prevent you from opening another one this financial year and then in a couple of weeks, after April 6th, you'd have to open another ISA and be back to the 3K limit. Yes compound interest is the way to go.
Savings/ISA wont have any impact on your credit rating, as you're saving not borrowing. Things to think of in that respect are to be on the electoral roll, any contracts like mobile phone etc, never miss a payment; same with credit cards. You may not like the idea of credit cards but having one and showing you can manage it will look good, so treat it as a debit card, only spend what you have and pay it in full each month so no interest. Even better get one that pays cashback, every little helps!
As for ING, their rates are no longer the market leader, and they seem to have this habit of dropping their rates over recent months despite no change in BOE base rate

pavlovs_dog

HGLTsuperstar wrote:

You can transfer your ISA wherever you like, regardless of how interest is paid, and it has no bearing on your allowance for this yr or next, as you're not actually contributing anymore just moving it. But make sure you request a transfer, dont just close your current ISA as this will prevent you from opening another one this financial year and then in a couple of weeks, after April 6th, you'd have to open another ISA and be back to the 3K limit. Yes compound interest is the way to go.

i see! so if i can do this in time, and get it in a high interest ISA, would i get my last month of interest (this tax year) at the new rate? :think:

HGLTsuperstar wrote:

Savings/ISA wont have any impact on your credit rating, as you're saving not borrowing. Things to think of in that respect are to be on the electoral roll, any contracts like mobile phone etc, never miss a payment; same with credit cards. You may not like the idea of credit cards but having one and showing you can manage it will look good, so treat it as a debit card, only spend what you have and pay it in full each month so no interest. Even better get one that pays cashback, every little helps!

i didnt think it would, but wanted to make sure. i am in the process of building up a rating (lack of credit rating rather than a bad one is my perceived difficulty). and i DO use my CCs as debit cards. am hoping to get a tescos CC for the clubcard points (we save them for the deals) as i dont really spend enough to justify a cash back card

HGLTsuperstar wrote:

As for ING, their rates are no longer the market leader, and they seem to have this habit of dropping their rates over recent months despite no change in BOE base rate

i have mixed feelings about ING - am annoyed at the high level of maintenance activity on the site which means it is often offline when i want to check my balance, and the drops in interest, but that said, i DO really like having the different pots and being able to see how im doing. it's not just furniture we're saving for - we also have a car repair/depreciation fund, and a "months wages" fund as an emergency fund for we we do eventually own the house, in case the roof caves in or whatever :eek: . it helps having different pots rather than numerous savings accounts, so we can clearly see what is what. that said, i am open to ideas if anyone can suggest a viable alternative

grumbler

pavlovs_dog wrote:

currently, i have just over £5500 saved in a HSBC mini cash isa, and i have filled my allowance for this tax year. with some help from grumbler, i have learnt some rather horrifying news - the interest rate on this account is a measly 4.1% AER. this rises to 4.35 % aer when the account balance is £9k or more. the highest this rate will ever rise to is 4.75% on an account balance of £15K plus - probably not the worst, but not the best either.

Transfer it to 5% Halifax Variable rate ISA Saver. You will not lose any interest.

1) i cant commit to huge amounts by regular transfers each months. i CAN do occasional large deposits, regular small (ie fixed at around £20-£30), probably topped up regularly with odd amounts here and there
2) i cannot lock anything away too tightly - i have absolutely no financial support from parents etc, and am paying for my degree off my own back. if the sky falls in, i need to be able to get at my money pretty damn quick
3) if possible, i like accounts that pay interest monthly - it helps stop me spending my nest egg (so far i've been very good and have not touched it once)

Open Halifax Regular Saver. It pays 7% on £25-£250 saved p.m. You can change monthly amount and can access the money in case of emergency (with loss of some interest though). It dosn't pay interest monthly but does help not to spend the money.

have been reading martin's articles, and the halifax/A&L both look quite attractive with their high %AER. would i need a current acc with A&L to open their ISA? and what is this about the bonus - am i right in thinking this is paid in addition to/on top of the standard ISA rate?

You don't need a current account with A&L, 5.2% include 0.7% bonus.

and then this regular savings lark - would i be better off putting money in a high interest regular savings account (will have £3k by the end of april), and drip feeding this at £250 incraments a months to my ISA - would this maximise my interest earning potential, whilst still allowing access to my money (product allowing)?

:mad: There is no point in drip feeding an ISA. Regular savings account is good for regular monthly savings. If you have a lump sum left after filling ISA you can put it to an instant access savings account and drip-feed the regular saver to maximise interest.

and if i do go down this route, what about my ing account - i suppose it makes more sense to put money into a high interest account for the year, milk it for all the interest its worth, and then move it to the ing account?

Yes, it makes sense to use regular savings account for a year and them move the lump some to a saving account or ISA.

and one final question - as interest is paid monthly on my current isa, would it be possible for my to transfer my current balance to a better paying ISA in preparation for tax year 06-07?

You can transfer at anytime without loss of interest (besides a few days for transfer sometimes) regardles interest is paid monthly or yerly.

if so,
1)could it ONLY be moved to an account where interest is paid monthly,
2)would i have to forefit a months interest if it goes into an interest paid annually account, and
3) could i move the whole balance of £5500, or just this years £3000? (on the basis of compound interest, i guess the more i can get into the account, the better?

Yes, No, Yes.

P.S. If your annual income is less than £4896+£2020 (this tax year) you can claim half of the 20% tax on your savings interest back.

pavlovs_dog

hey grumbler, thanks for your continued help :beer:

grumbler wrote:

Transfer it to 5% Halifax Variable rate ISA Saver. You will not lose any interest.

but according to THIS that ISA offers a worse rate of interest than the one i currently have - only3.7% AER on balances up to £12k, 3.85% up to £18k - A&L is looking the best deal. will pop into branch next day or so to find out more, and sort out the transfer

jimclark1967

pavlovs_dog wrote:

but according to THIS that ISA offers a worse rate of interest than the one i currently have - only3.7% AER on balances up to £12k, 3.85% up to £18k - A&L is looking the best deal. will pop into branch next day or so to find out more, and sort out the transfer

Grumbler was referring to THIS account

It's the ISA Saver Direct not the ISA Saver - confusing I know.

JC