Regular Saver vs ISA

sunshowers

...ok so that would, in the long-term, gain more interest than cycling through the regular saver.

I think its better to max out ISA and then move onto regular savers..

jem16

sunshowers wrote:

...ok so that would, in the long-term, gain more interest than cycling through the regular saver.

I think its better to max out ISA and then move onto regular savers..

I think a lot of people use the regular saver to save up the £3k to dump into the ISA come the start of the new tax year.

masonic

sunshowers wrote:

...ok so that would, in the long-term, gain more interest than cycling through the regular saver.

The only difference is that the interest paid out from the regular saver would have to be put somewhere else. That somewhere else might not attract quite such a high rate (you could put it in an ISA!), but it would typically take several years for that small sum of money earning a lower rate to erode the higher interest gained from using the regular saver for the remainder of the funds.

Edit: For example, if you were using a 5.45% paying savings account (e.g. Icesave) to feed your 7% regular saver, you would get about 6.3% interest overall (about £189). That £189 would have to stay in the savings account in year 2, so you would earn £199 [Total: £388] instead of £201 [£390]. If you used a 5.5% ISA, you would get £165 in year 1 and £174 in year 2 [Total: £339].

sunshowers wrote:

I think its better to max out ISA and then move onto regular savers..

I would tend to disagree. I think in your position, where you have several years of being a non-taxpayer, it would be better to put money into the ISA at the last opportunity you have to do so before you become a taxpayer. That is, do things the other way around for the moment and make use of a regular saver, then move onto ISAs when you need to think about sheltering your money from tax. But it's your money at the end of the day.

tom188

Basically just make sure youve made use of as many tax free allowances as you need to shelter your cash from tax by the time you are working. Until then it will make no great odds at what point in the tax year you pay in.