Best options - saving for an emergency fund

Wizwoo

Hello,

My husband and I currently do OK. Having been watching this site when in debt and learnt to deal better with money we've cleared them and now managed to save some money.
We are paying extra off our mortgage but about 9 months ago I found out that the company I work for will be bought out and redundancy risk is quite high. So, I'm looking for another job but want to be prepared.

We've been saving a "rainy day fund" which is currently in a current account. We would like to move it to an account that would give us a little more back. I find all the options out there confusing. Could you advise what type of accounts I should focus on.

We should have about £5K soon and may be able to add more some months (not fixed amounts though). In terms of access - we should be OK to give 30 - 60 days notice before accessing it. If we do need it though we'll probably need to draw out monthly amounts (to cover living costs).

Many thanks,
Woo

xrjtg

In your situation you should just go for an instant access savings account. If you pay tax then you should look at cash ISAs, otherwise you can look at non-ISA accounts. Both of those links go to the articles on the main site.

Another option to mention is the Lloyds Vantage current account, which can be massaged into behaving like a savings account paying 4%. Search the forum to find out more about this.

Jake'sGran

Congratulations on clearing your debt. You have done well to reach £5000 and you need to put it in an instant access account paying a reasonable amount of interest and where giving notice is not required. Egg is one example. They are very easy to use and are paying 2.5% (includes a bonus). You can find the best accounts in the banking/saving section shown at the top of this page.

I just had a look at Compare the Market and the following are listed as paying 2.6 to 2.8%
but some of them include a one year bonus:
Nationwide, ING, Tesco etc. I won't mention Santander as lots of people who post on here have awful problems with them.

Wizwoo

Thank you both - we don't have the £5K yet...both hubby should get a small bonus and I've got some overtime due this month which should get us pretty close.

I'll have a look at the best buy tables.

The other thing is limiting access a bit I don't want to be able to draw it out to easy.

Thanks,
Woo

psychic_teabag

LLoyds vantage pays 3% on £3k so it's still competitive with other instant-access accounts at that level.

Coventry has an e-Notice 30-day-notice account paying 3.05% (or immediate access with loss of interest in an emergency). Or perhaps look for postal accounts to limit access if you need to.

robbieroy

Wizwoo - I was in the same position as you with money building up in my current account. I opened a Post Office Online Saver at 2.9% AER. It is operated online and it is simple to transfer in money from your nominated account (my current account is my nominated account) to the PO account and vice versa (but can take 3-5 working days - I am happy to put up with that). You can transfer in money from you current account by regular monthly standing standing order or by one off payments depending on your savings for the month.
If you have used up you ISA allowance then this is a reasonable solution with "instant" access. The 2.9% includes a bonus for a year so you may need to move your money after that.
RR

Wizwoo

OK - some more good ideas. We don't have any ISAs and don't want to make it too easy to dip into it.

Thanks,
Woo

Jake'sGran

psychic_teabag wrote: »

LLoyds vantage pays 3% on £3k so it's still competitive with other instant-access accounts at that level.

Coventry has an e-Notice 30-day-notice account paying 3.05% (or immediate access with loss of interest in an emergency). Or perhaps look for postal accounts to limit access if you need to.

I am not sure this is correct. I have three Lloyds Classic with Vantage accounts and these accounts pay 4% for £5-£7k but only if £1000 is being deposited each month in each account. What most people do is have the same £1k going in and out of the accounts each month.

smallfry27

Jake'sGran wrote: »

I am not sure this is correct. I have three Lloyds Classic with Vantage accounts and these accounts pay 4% for £5-£7k but only if £1000 is being deposited each month in each account. What most people do is have the same £1k going in and out of the accounts each month.

Interest is tiered depending on the balance - Current Accounts with Vantage AER %
£1+ 0.10%
£1,000+ 2.00%
£3,000+ 3.00%
£5,000 up to £7,000 4.00% - before tax, so the 4% comes down to 3.14% net.

robbieroy

Hi again wizwoo
Your priority should then be to put the excess money (the rainy day money) into an ISA. Both you and hubby can do this meaning that you can stash away £5100 each in cash ISA accounts this financial year and next. Remember that the interst is tax free on ISA accounts. You will need to decide whether you want to put the money in a 1, 2, 3 or 4 year fixed rate account. The positive of this is that the rate remains the same. The negative is that if interest rates rise, it is unlikely that the interest rate on your ISA will rise. Check out the information pages on this site for the best current ISA deals. You can invest for this tax year 2010 - 2011 (do this by the end of March) and then again at the start of the next tax year in April.
A riskier option would be to put your money in a stocks and shares ISA.
Hope this helps
RR