Whats best to do with around £30-40K

gogsboy

Friend of mine is about to come into some money and is wondering whats best to do with it.

Ideally need to be pretty easy access if money was needed and they seemed to like the idea of montly interest.

I have always just used Nationwide e-saving myself but then thats just because its been handy and I dont know the first thing about ISA's, mini ISA's and so on.

Also I cant give the best advice as I dont know about the different rates, AER and so on.

Bascially I thought the e-savings was pretty good but I'm reading bits on here about an Iceland bank and an Indian one as they seem to be better, but how better are they likely to be on such an amount of money.

Thanks

ReportInvestor

I assume the money is to be saved rather than invested because you have mentioned "easy access".

Well supposing Nationwide increases its e-savings rate from 4.8% to 5.0%.
IceSave is 5.45%.

So over one year on £10K = 0.45% difference = £45 gross = £36net after 20% basic rate savings tax.

So for £30K the difference would be 3X£36 = £108 after tax.

You can ask IceSave for monthly interest but it won't gain your friend more money as the monthly rate is slightly less than for annual interest.

Your friend should also save £3K into an ISA each tax year starting now (NSI is paying 5.55% tax free) and continue adding to an ISA in April at the start of the new tax year.

gogsboy

Thanks for that, yes they are just hoping to get the best rate on the money but also not have any hassle with making a withdrawl if needed.

The ISA sounds a good idea but how much is it they would be allowed to put in and you mention about continue adding, can you give a simple expalnation how this works.

I always thought an ISA could only be a set amount, also cna you take money out from it or is it best to put the money in and not touch at all for the year.

ReportInvestor

£3K max per tax year.

So £3K now for 2006/7.

And a further £3K on 6th April 2007 for the 2007/8 tax year which starts on that day (no point delaying as it's tax free interest ).

Repeat until you run out of money to put into cash ISAs.

gogsboy

I see, you learn something new every day, I thought you had an mini ISA which was 3k max and ISA 7k max, but thats not the case.

With this ISA, could they builld it up to say 12k or is there a limit.

Also does it work similar to a savings account where you can take out money if needed and if so is there a penalty, ie loss of interest.

Thanks again

mdb99jh

You can take money back out of your ISA, but it is best to avoid if possible because you are wasting some of that year's allowance. the 3k limit is on the amount you are allowed to pay in that year, irrespective of withdrawals. For example:

You pay in £2500
You then withdraw £500
You can only put in a further £500 that year, not £1000 because there is a £3000 limit on the amount you pay in.

Make the most of the tax free interest from the ISA by using the full 3K allowance and using your savings elsewhere for when you need cash.

HTH

p.s. there is no limit. some people have ISAs with 20K+ in them

tom188

An ISA is a blanket term for a tax free wrapper.
For a mini ISA the maximum per tax year you can pay in is 3k.
Mini isas can be Cash or Investment based.
For a maxi ISA the max per tax year you can pay in is 7k.
Maxi isas can only be investment based.
You can only have one or t'other.

Underlying investment/savings products vary in their terms and conditions in the same way normal savings accounts or unit trusts etc do.

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tom188 wrote:

For a mini ISA the maximum per tax year you can pay in is 3k.
Mini isas can be Cash or Investment based.

I believe you can have £4K in a mini-shares ISA.