Regular Savings Accounts

goulss

Hi Martin,

I am a taxpayer, but my wife is not. We are about to come into some money (around £10,000) how do we maximise our savings ??

david78

Stewart,

You best bet is to put as much as you can into cash ISAs in your name and your wifes name. (Don't let the fact she is a non-taxpayer put you off). If you haven't used your ISA allowance this year, then you can each put away £3000.

That leaves £4000 and you should put this remainder in an account in your wifes name. She will still earn interest on this tax free. Find the best instant access account and then feed money from this into a regular savings account.

ohit

I just went into a Halifax branch today to sort out a Web Server and Regular Savings accounts. I now have both open, so that's fine.

However, the lady did tell me somethimg which is quite concerning and pretty much opposite to what Martin says in his article...

The lady explained how I have understood it wrong, how it is NOT 6.05% of £3k (and thus £195 gross), but instead something like £96 gross for the year. She said that the regular savings account is useless if I was going to use a lump sum to fund it (giving the above interest calculations as a justification). She was trying to sell me something else, so I politely told her to get on with what I wanted.

Personally, I will be using a monthly income to fund the regular savings account(s), but what was she talking about? Her underlining statement is basically completely opposite to what Martin says under "How to invest a lump sum?" in the article.

Please help!

MSE_Martin

Unfortuantely she has a basic misunderstanding. She is quite correct that the interest will be around £96 for the year.

What she's missing is that i suggest drip feeding from a standard savings account and you will get interest from that as well - and the total interest over the year is more using this method. Look at it like this

Month Savings Acc Halifax
0 3000 0
1 2750 250
2 2500 500
3 2250 750
4 2000 1000
etc

So as you can see in month 4, £2000 is getting interest at say 4.7% in the savings account and £1,000 is at 6% in halfiax. This is why i call it drip feeding.

It means if you have £3000 in a savings account at 4.7%, and drip feed to halifax at 6% then your overall interest average is 5.35%, much better than just leaving it in the savings account.

Hope this makes sense

Martin

ohit

Thank you Martin, it makes sense now.

But now my question is... how come it's only £96/year from the halifax part only?

I've always been under the impression that it's 6.05% on £3k, but I've obviously missed something quite important.

MSE_Martin

It is 6% but not on 3k. You only have 3k in for the last month remember. The balance you have in there starts at 0 and grows.

In effect your getting (roughly) 6% on an averge balance of £1,500

ohit

ding!

It's too easy to forget these simple things when you see headline grabbing rates of 6%.

Cool, so drip feeding here we come...

Cheers Martin.

victoriapavier

Martin - confused by the minute. I have a substantial amount to invest whilst we await a loft conversion (probably commencing in spring 05. Therefore I would like the money to earn a little in the meantime - what is the best way to cash in on an 8 month lump sum?

Unbelievable_2

what is the best way to cash in on an 8 month lump sum?

Birmingham Midshires Internet Easy Access pays 5.4% (introductory bonus lasts a year so gives a bit of leeway on your 8 months). Can invest up to £5 million - so unless your loft conversion is really swanky should be good enough :-*

ED

5.40% gross interest in Birmingham Midshires could be boosted for some funds to
5.85% gross in Derbyshire Bdg Society's regular, monthly savings a/c. As described above, up to £1,000 per month can be filtered into that a/c (your other half could have one too, so £2,000 per month is moved). When time comes to have little money to spare, you could reduce the monthly Standing Orders to just £10.

Unbelievable – in your experience, how many banking days does it take to move £'s in and out of Birmingham Midshires a/c? Generally, does the a/c run smoothly – any problems?