Unsure about begining to save

Dancarr56

Hi all,

I'd just like to say that I'm a new user to this forum and am looking for some guidence to help me understand what is the best way for me to save for my situation.

OK. I currently live in a council flat with my partner. We both work full-time on low wages but are in jobs with great career prospects so our wages will be going up (hopefully) yearly.

We have an annual income of £21,500.

Each month once we have deducted all our out-goings, including £100 for us to enjoy the month with (cinema, takeaways etc...), we have roughly £300 which we would like to start saving.

Our plan in the coming years is to get out of the council flat we live in and finally own our very own home, start a family and live happily ever after :j

So basically, this money we want to save will most likely be towards our mortgage deposit.

Now that you know abit of background information, can anyone suggest a suitable method of saving that will offer us good interest rates but more importantly the best security.

Able to deposit £300 a month into the account.


I've read the guides on the forum about ISA's and other types of accounts, however i am not 100% confident that i fully understand how they work therefore would like some help please

Thank you in advance.

-

Dan.

Primrose

Looking at your outgoings, if you're really determined to save for a house, I wonder if £100 a month for cinema, takeaways, etc. isn't rather high? You're going to need a fair sum for a deposit. Would it be worth cutting back on that figure a little in case property prices start rising again and you find yourself in a position where your deposit is nowhere near the minimum needed and you're for ever chasing a dream that is disappearing into the distance?

You need to get the best rate you can for your savings and regular monthly savers often pay higher interest than instant access accounts. Most have a monthly maximum limit of £250, so you could consider opening two different accounts and splitting your savings in whichever proportion favours the higher-paying account. Most regular savers last for a year, so possibly once they've matured, as you're taxpayers, you could transfer the money into Cash ISAs which would be tax free, or to a short fixed term bond if that is paying a higher rate after tax has been taken into consideration.

ISAs are really tax-free savings accounts with upper annual limits for amounts you can paying into them. After April, everybody can pay up to £5100 into an ISA every year. Your new allowance starts again at the beginning of every tax year. but if you don't use it for that year, you lose it as you can't backdate it. At the moment many of them are paying lower interest rates than other types of savings accounts so you have to balance off the tax free interest against higher interest elsewhere on which you pay tax.

Wobblydeb

I would have a look at regular savings accounts in your position. Your savings will be safe if you stick with a bank/building society covered by the FSA guarantee. In practice this is all of the bank and building society names you'd recognise on the high street (and some more exotic foreign-owned banks too).

I find regular savings accounts great, because they usually pay a higher rate of interest than other savings accounts. Plus it is motivating to see the money build up each month, and there is typically a penalty (like loss of interest) if you take money out, or miss a payment before the year is up. It has stopped me raiding my savings a couple of times in the last few years!

Rates aren't as good as they were, but still are beating ISAs and normal savings account. One of the drawbacks is that you normally need a current account with the same bank/BS.

A good example might be First Direct. Their current regular saver is paying 5% gross on up to £300 per month.

Oh - and make sure you set it up the direct debit to pay into the savings account at the start of the month. That way you will not be tempted to miss it

Nosht

Do you not qualify for Working Tax Credit?

N.

rb10

Some good advice in Primrose's post.

There's a list of the best Regular Savings accounts here; Barclays' one at 4.25% AER is good. You can put £250 per month into here, then at the end of the year move all the money into an ISA.

For the other £50 per month that you have to save (and for the money from the Regular Saver to go into at the end of the year), it would be worth looking into ISAs. There's a list of the best here.

Dancarr56

A big thank you to everyone who has contributed to this thread, you've help a lot.

A couple of questions.

The ISA accounts. Am i right in saying that if i open one up, lets stay 10th April. And i deposit £5100 into the account. The year after, can i deposit another £5100 into the account? and so on and so on?

Also, if i deposit £5100 straight into the ISA, will i be refused any interest due to it being the limit already?

Sorry but it may sound like a stupid question, it most likely is, which shows my lack of understanding, but where money is involved, i would rather make myself look stupid than make a massive mistake financially, I'm sure you'd all agree. Forgive me, i have tried to educate myself read the guides (as mentioned in the OP), but i'm second guessing myself each time i "think" i've understood it.

WobblyDeb

What you told me about regular savings account is exactly what i am looking for. I like the way it works from your description. I will most likely be looking into this option since the ISA is still a bit confusing as you can see, I've asked more questions above

Thanks all and look forward to more helpful repliies if you'd be so kind

Dancarr56

Nosht wrote: »

Do you not qualify for Working Tax Credit?

N.

A few people have asked me this (family and friends)

However, i do not know much about it, and do not know whether i qualify. I suppose I'll have to look into it and see what the outcome is.

Thanks for the reminder.

Lokolo

Dancarr56 wrote: »

A big thank you to everyone who has contributed to this thread, you've help a lot.

A couple of questions.

The ISA accounts. Am i right in saying that if i open one up, lets stay 10th April. And i deposit £5100 into the account. The year after, can i deposit another £5100 into the account? and so on and so on?

Yes

Also, if i deposit £5100 straight into the ISA, will i be refused any interest due to it being the limit already?

No. Interest does not count towards allowance

Sorry but it may sound like a stupid question, it most likely is, which shows my lack of understanding, but where money is involved, i would rather make myself look stupid than make a massive mistake financially, I'm sure you'd all agree. Forgive me, i have tried to educate myself read the guides (as mentioned in the OP), but i'm second guessing myself each time i "think" i've understood it.

WobblyDeb

What you told me about regular savings account is exactly what i am looking for. I like the way it works from your description. I will most likely be looking into this option since the ISA is still a bit confusing as you can see, I've asked more questions above

Thanks all and look forward to more helpful repliies if you'd be so kind

ISAs aren't confusing, they look confusing from the outside but when you understand them you'll realise they're as simple as making toast.

savingmummy

Dancarr56 wrote: »

A few people have asked me this (family and friends)

However, i do not know much about it, and do not know whether i qualify. I suppose I'll have to look into it and see what the outcome is.

Thanks for the reminder.

Here is a link with info regarding working tax credits, it also has a calculator to work out what you may be entitled too.

http://www.moneysavingexpert.com/family/tax-credit-child-working-overpaymen

Baldur

Dancarr56 wrote: »

The ISA accounts. Am i right in saying that if i open one up, lets stay 10th April. And i deposit £5100 into the account. The year after, can i deposit another £5100 into the account? and so on and so on?

Yes.

Also, if i deposit £5100 straight into the ISA, will i be refused any interest due to it being the limit already?

No, the annual allowance only relates to new money subscribed, any interest earned is the tax-free element of a Cash ISA.

An ISA goes on earning tax-free interest on both the capital that you pay in, as well as on any accrued interest.

Dancarr56

Lokolo wrote: »

ISAs aren't confusing, they look confusing from the outside but when you understand them you'll realise they're as simple as making toast.

Oooo i finally understand it, thank you!

I am finally going to take charge of our incomings and make the most of them.

It may be considered "sad", but i am actually getting exciting at the thought of saving money.

Such a friendly and helpful community here.

Thank you all :beer: