Lump Sum and General Savings Advice

hollzy

Hi,
I graduated in 2008 and am new to the idea of saving for the future ;-). Now that i'm working i'm trying to put money away for both a mortgage and my wedding. I've got the ole tax free ISA set up and ticking away, but if i have extra money to put away every month, what sort of accounts should i be looking at? Also, if i had a lump sum of £4k to invest, what would be my options for maximum returns with minimum risk?

Thanks

psychic_teabag

What sort of timescale were you looking at for mortgage/wedding ? Within a year, more than a year, five years ? Do you have overdraft/student loan to pay off, or anything like that ? Similarly, for the 4k investment, can you lock it away long-term, or do you need it to be accessible in an emergency, for example.

Regular saver accounts are good for monthly savings, but tend to lock the money away till the end of the year, and need a minimum each month to keep the account alive. You could use the lump sum to drip into a regular saver just to keep it alive, and add any extra you have each month.

There are current accounts that pay very good interest as long as you pay in monthly - I think lloyds pays 4% on balances from 5000 to 7000 if you pay in 1000/month. Otherwise you can get 3.3% on an instant-access savings account. But if you are only looking on the short term, might be better to exploit any one-off incentive payments on the go. Eg I think A&L offer 100 just to switch current account to them. http://www.moneysavingexpert.com/banking/compare-best-bank-accounts#credit

hollzy

Hi,

Thanks for that. I'd be happy to lock away £4k for a year as i will still have the savings in my isa for emergencies. Some of the £4k I could possibly lock away for maybe 2 years or until we have enough money for a deposit.

I was looking at barclays regular savings accounts but because the money is being dripped in i won't be earning as much interest as i should? I already have a lloyds graduate current account so could look to switching it for the highter interest.

Are there any good options saving a lump sum for 1-2 years?

Thanks

psychic_teabag

There does seem to be some confusion over drip-feeding into a regular saver. Some say you are really only getting half the advertised rate, but it's just that the money spends on average only half the time in the account. http://www.moneysavingexpert.com/savings/best-regular-savings-accounts#dont

Barclays regular looks like it gives you access to the money, but consequently gives a lower rate. You've just missed halifax's regular saver at 5%, but you can also get 5% from natwest if you also open a current or savings account.

For just saving as a lump sum, have a look at http://www.moneysavingexpert.com/savings/savings-accounts-best-interest#bestbuys for instant-access and fixed accounts.
If you happen to be near a West Bromwich bs branch, I think you can get 3.7% instant-access
Oh, and I forgot to mention that you can get 6% interest on up to 2500 for first year on a couple of current accounts - http://www.moneysavingexpert.com/banking/compare-best-bank-accounts#credit

See also this thread which points out that you could fix for 5 years at 5.2% but the early-access penalty is sufficiently low that accessing after 1 year is overall not much worse than fixing for 1 year, accessing after 2 years is not much worse than if you had fixed for 2 years in the first place, etc. But you'll have to do the sums yourself before committing. I think a similar argument applies to the 2-year fixed account from the AA.