Student - What to do with my money?

Sceptic001

Chris4 wrote: »

Thanks Sceptic001, I think I understand it now. I see the inflation rate is determined every month. Is the average for the year then calculated to work out what is applied to the NS&I account, or something?

This is a very forensic line of questioning - are you sure you're not studying for a law degree?

NS&I do not use averaging, they take the RPI figure when you invest and the anniversary RPI figure to work out the annual increase. This gives the headline inflation rate often quoted in the media. So, for example, if you had invested last June, your RPI rate based on this table is
222.8 / 211.5 = 1.053 (ie. 5.3%)

Anticipating your next question , NS&I use figures that appear to be 2 months in arrears (the April figures are used for June purchases) because these are the latest figures available when the transaction is done.

Chris4

I see. So is it not a bit risky because I could end up with a low rate and would have wasted 'locking it up', therefore a normal savings account could have a higher interest?

debbie42

That's the nature of the product: you don't know how well (or not) it has fared with other options. The tax free angle makes it attractive to higher rate tax payers.

The LLoyds vantage account pays a good rate, but needs £5K-£7K balance for the highest rate, and also needs £1K churning in and out per month.

A&L used to offer something similar, though I haven't checked recently.

Sceptic001

Chris4 wrote: »

I see. So is it not a bit risky because I could end up with a low rate and would have wasted 'locking it up', therefore a normal savings account could have a higher interest?

Yes, there is no such thing as a risk-free option. That is what makes life interesting :j. If you think prices will fall then this option is not for you.

Given that the best instant access account is around 2.8%, the break-even point for RPI is about 2% for a non-taxpayer. Risk can be reduced by diversifying, so why not put some into an instant access account and some into ILSCs?

3Dogs

Sorry about that - had a blonde moment - did report on abuse and now gone

TRUSt_NO_1_2

Lokolo wrote: »

Inflation is the rise of prices. RPI (Retail Price Index) is a way of measuring this. As is CPI (Consumer Price Index)

It's the reason why Mar Bars now cost 80p rather than the older days when they used to cost 30p.

sorry to get technical on you but...

..inflation is not the rise in prices...

It is the increase in the supply of money (M2,M3 etc..) ....which often results in prices going up.

TRUSt_NO_1_2

Loopgames wrote: »

This may sound mad but...

Start your own business! At uni you have the wealth of resources for you for free! Wish I had done this myself currently am having difficulty maintaining my business with 2 young kids.

Only a suggestion of course but after testing the market for 3 years you'll have a job by the time you graduate plus maybe win a few awards - very few enter them so chances are in your favour if you have a good idea (big catch!)

Depends how much time you have and your appetite for risk...

How about a student '1 Week Loan Company'...managed on a database.
Pair up lenders with borrowers for 1 week for a max of a £20 loan with a £2 interest payment and you charge the borrower £1 for the service.(so borrower pays £3 int total for service and loan)
Lender gets 10% interest (£2) for a weeks loan.

For first time borrowers (or even all),you could get a deposit of some tangible asset,to protect lender.Like a pawn shop principle...without losing half the assets value though.

If it saves bank charges ,or means a night out too good to miss ,for the borrower it's worth it

No profit at first,as it will take time to enter proof of id/address,but once you've registered a few hundred people and given them 'reliability scores,it may yield profit,for little effort.

The risk is with the lender of course.

If it gets going..you could start to put some of your £5000 into the lending pool. 10% interest /week =500% per annum.

Sceptic001

TRUSt_NO_1 wrote: »

sorry to get technical on you but...

..inflation is not the rise in prices...

It is the increase in the supply of money (M2,M3 etc..) ....which often results in prices going up.

I believe Lokolo is correct. My understanding is that inflation is a rise in the general level of prices. Monetarists would argue that an increase in the supply of money (technically known as an increase in the supply of money) causes inflation, but that is a whole branch of economics way beyond the scope of this thread

stator

Inflation is most commonly measured as a rise in prices, it's the relative devaluation of a currency. Increase in money supply does cause inflation but they are not the same.

TRUSt_NO_1_2

stator wrote: »

Inflation is most commonly measured as a rise in prices, it's the relative devaluation of a currency. Increase in money supply does cause inflation but they are not the same.

Apologies to the original poster for going off at a tangent..but

The politicians are trying to change the definition of inflation so they can manipulate it.

If you really think about it...what prices are measured,what items ?....everything that is sold ?? What weightings for each item ??

The ONS constantly change the basket of goods they measure 'their inflation' by,based on what they 'think people buy',based on surveys. It is fatally flawed.
Because people can't afford fiilet steak and now buy beef burgers instead,they take fillet steak out and replace it wiwth beef burgers and say the basket of food is only showing 3% or something ridiculously low.
Whereas in fact fillet steak that was about £12 per kilo 5 years ago is now £32 /kilo.
It's not even near comparing apples with pears.

There is an infintesimal number of variables.It cannot be done.


Money supply on the other hand can be (but they have now removed the stats) measured very accurately.
It is the the major cause of price increases ,as you will see in the next couple of years.