Please help - confused over organising savings

Miss_Penny_Pincher_2

Thanks for reading this.

I currently have a fixed rate mortgage which comes to an end in March 2008. The mortgage allows overpayments of £500 per month which so far I have been able to make every month and I'm also trying to save as much as possible each month to build this up into a lump sum to pay off as much as the mortgage as possible in March 2008.

Really I want to maximise the interest I can earn in this time so that I'm earning more interest than I'm paying to the mortgage company. The mortgage is at 4.39% so really I would need savings to be in an account paying at least 5.5% before tax.

I have just put £3,000 into the NSandI cash ISA (5.05%), I have £2,000 in A&L Premier Direct current account at 5% until Dec (maximum allowed is £2,500). I also have £3,000 in Cahoot (4.55%) which I'm going to use to drip feed into 4 regular saver accounts that I have just opened. These are:

A&L (10%)
Lloyds TSB (8%)
HSBC (8%)
Halifax (7%)

I am going to try to save £250 into each of the regular saver accounts each month and also I think I may be able to save £350 from my wages each month if I stick to strict budget which will also go towards feeding these regular savers.

My question is should I move the Cahoot money to another account that pays better interest? Would need to be able to use it to make payments to regular saver accounts though so would this be worthwhile? Also should I consider opening another regular saver? I'm worried this won't be viable as already paying £1,000 a month into them and my Cahoot feeder funds will only last so long.

Thanks - any opinions / advice welcome

masonic

Well with £8000 total savings (including the ISA, which you may or may not want to touch), plus £350 p/m, you only have about £12000 to feed into the existing regular savers, so I think you are at your limit in terms of these.

Edit: I suppose you might want to consider another one if you wanted to get your money in there faster and could drop the monthly payments without penalty when your savings run out, but if you use up your savings too fast, you will only have what you can save each month to make the regular savings payments, which might leave you short.

As for the Cahoot account, it looks like you will have empied it within about 5 months. A difference in interest rate of +0.5% over that time (allowing for the balance steadily decreasing to £0) is going to earn you less than £5 extra if I haven't stuffed up my calculations. I wouldn't move it for £5.

Miss_Penny_Pincher_2

Thanks Masonic - that's made it much clearer! Do you think I'm going about it the best way seeing as it's only for short term?

masonic

I think you will have some fun keeping track of everything , but this is the best way of squeezing as much interest out of your savings as possible. I think even for longer-term savings, cycling what you can through regular savers is a good thing to do.

Miss_Penny_Pincher_2

It certainly is 'fun' :rotfl: I'm thinking of producing a mini-spreadsheet so I know how much has to be in which current account on which date of the month!

Miss_Penny_Pincher_2

masonic wrote:

I suppose you might want to consider another one if you wanted to get your money in there faster and could drop the monthly payments without penalty when your savings run out, but if you use up your savings too fast, you will only have what you can save each month to make the regular savings payments, which might leave you short.

I was thinking of perhaps dropping the lower paying regular saver accounts to the minimum monthly payment when money runs low. As this would only be in a few months I think 4 is enough for me as I don't have a huge amount to save and 5 is probably just being greedy

masonic

Miss_Penny_Pincher wrote:

I was thinking of perhaps dropping the lower paying regular saver accounts to the minimum monthly payment when money runs low. As this would only be in a few months I think 4 is enough for me as I don't have a huge amount to save and 5 is probably just being greedy

Probably wise. You might be glad of the extra flexibility, especially if you find you aren't able to save as much per month as you had hoped. I mentioned it only in case you were really out to squeeze your savings for everything they are worth.