£16,000 to Save - best way?

pauljohno

Hi everyone,

I'm a long time reader of these forums, but I've never signed up.

Anyway, I've come into some money and I'm looking to save it in a risk free way. I'm in my mid-20's and will be looking to put it down as a deposit on a house within the next year or two.

Whats the best way to save my £16,000, and what should I respect in returns?

Many thanks!

xrjtg

There's a good article on the main site about savings accounts. You should start with a cash ISA, on which interest is tax free. You might also like to search the forums for "Lloyds Vantage", which is a current account that can be manipulated into a (relatively) high paying savings account.

You're doing well to get 4% annually at the moment.

natman

Hi, I am going to give you a few examples of saving assuming you pay basic rate tax.....

If you placed £16,000 in say the best paying Instant access account - at 2.8% you would get -
Year 1 - £16,000 plus years interest of around £358 = £16,358
Year 2 - £16,358 plus years interest of around £366 =£16,724

With this in mind,
You could perhaps open up a ISA or a fixed rate ISA Alderomore has a 3% 1 year or principality has a 2.8% instant access one. ( Paying in £5100 leaving you £10,900 to save else where)
Fixed term saving account ( 1 or 2 years) perhaps put £5000 away for 1 year at 3.15% or 2 years at 3.8% With Baroda Bank
Then the rest in an Instant access account at 2.8%

Basically its up to you how you manage your money, how much can you lock away for a while, do you need to get at all of it quickly??
I suppose if you can get an average of 3% accross your savings in todays market that is pretty decent and would give you in one year -
£5100 in 2.8% ISA FOR ONE YEAR = £5,242
£5000 IN 1 year fix at 3.15% = £5126
£5900 in instant access for 1 year = £6032
Totalling - £16,400, which is £62 better off that just Instant access alone

Some people are opening up 3 loyds vantage accounts where you can place in your case £5333 in each account and earn 4% on all the money, which would be - on your 1st year
£16,512, which mathematically the best return, however you have to make sure £1000 is cycled through the accounts, some people go for this account , and it may be worth looking into!
Not sure why I dont do this, as it would make sense to get a 4% return rather than a 3% return, but because it is actually a 'current account' I tend not to think about that at all....Strange !!

Good luck

pauljohno

Thanks for the info natman. I've been looking around and yes 4% seems to be the best I can get.
I'm just shocked that it amounts to only £640 interest in 12 months!

natman

pauljohno wrote: »

Thanks for the info natman. I've been looking around and yes 4% seems to be the best I can get.
I'm just shocked that it amounts to only £640 interest in 12 months!

Dont forget to take your tax off if you pay it!
Basic tax it would be £512
Higher Tax - £384