Help with savings efficiency

supermetroid

Hi all,

I'm new to MSE, and I would like your input on whether my savings are giving me a good return.
Atm, I have:

£10.5 k with Natwest ISA (I think the rate is 3.51%, as I get £30 per month)
£10.5 k with Kaupthing Edge/ING at 3% (guaranteed for 12 months). I had to close the inital account with ING, as it was transferred from KE
£6k with ICICI at 7.25% for one year (ends this year I think)

is there any way for me to improve my savings income? or a worthwhile investment where I can see my money grow? I need extra income to help me do things that I would like to do e.g. travel, rent, etc...

jon3001

supermetroid wrote: »

I need extra income to help me do things that I would like to do e.g. travel, rent, etc...

In the long-run savings accounts are no good for this. You spend the interest and then inflation ensures that you're left poorer.

Sure - leave a bit in reserve for emergencies. But the balance should be invested in income producing assets.

This article discusses options such as corporate bonds and equity income funds.
http://www.thisismoney.co.uk/investing/article.html?in_article_id=459569&in_page_id=166

Property funds are also becoming an attractive option thanks to their rising yields.

supermetroid

Thank Jon

I had a read, though I'm not sure if I am mis-understanding something.

A bond @ 6% is the same as a savings rate @ 6% ?

jon3001

supermetroid wrote: »

A bond @ 6% is the same as a savings rate @ 6% ?

No. The savings rate is usually variable (maybe at the whim of the provider or because of base rate changes). Although you might be getting 6% you could be getting something much different next month.

What some people think of as bonds are actually fixed-rate deposits. And although the savings rate is fixed you don't usually have access to the money during the term.

Corporate bonds have a fixed 'coupon' (e.g. 6% per £10,000 bond). This doesn't change and the bond may not mature for decades. However the value of the bond itself (e.g. £10,000 at issue) is (somewhat) variable due to base rate changes (savings might be more or less attractive) or the credit-worthiness of the issuer. Usually a retail investor will get access to the corporate bond market via a fund.

For an income portfolio the bond works best though in conjunction with other asset classes which also offer some inflation-protection. E.g. equity income funds (which contain stocks of high dividend companies) and property funds (lettings which yield a rent). Dividends have also been known to be a very stable source of income.