Help - Saving with debt (no choice!)

Laze

OK, so not only did I read the website stating "Don't save whilst you have debt", but I know it's common sense to not do this. Save whilst you still have debt. But I have no choice.

I have credit cards to pay off, that's fine. I WILL do this before I save. However, I have one due to Balance transfer soon so want rather than pay off straight away, want to do it as little as possible whilst it's on 0%.

I have left as of now (14/6/11):

Card 1: [STRIKE]£300[/STRIKE] £0 (0% ending end of June 2011)
Card 2: £1800 (0% ending end of August 2011)
Card 3: £1000 (0% ending end of October 2011)
Card 4: £1800 (0% ending end of January 2012)
Card 5: [STRIKE]£195.70[/STRIKE] £0
Car: £19k @ £350 per month for 58 months, 2 other months at different costs for start and end payments (6 now done).

I just paid 2 cards off and will need to balance transfer CARD #2 as I cannot pay £1800 off in that time before the deal ends.

So where I need the help...

I got a settlement figure on my car recently, and knowing I can't pay it off, I asked them if next year (when my cards are paid off) if I can add to the pot or pay extra per month and was told I could not. They said something about paying off a years worth to decline the length of the loan (It was a 5 year one). I can't do that either. So I am resigned to saving up to pay it off in 2 years (which will be hard enough as it is).

The settlement figure came to just under £16k.

I know NOTHING about savings or ISAs (doubt ISA would be useful in this case though from what I read), but I want to know what would be best for me starting next February to add £500 every month. What would be the best way of getting that cash working for me? - I don't understand a Shortfall or anything and I really get stuck on where you can lose money from what you already have unless a bank goes under.

Or should I forget about saving it and just let it store up in my current account? as £500pm will do nothing for me.

Sorry if this is the wrong area, total nab here (see to the left with my little post it note!). But I did post it in savings. Added a little background so you know where I'm coming from.

Thanks all.

Eco_Miser

Lots of choices: Easy access savings account (3% or better), Regular Savings Accounts (up to 8% but strict conditions). Using an ISA saves paying tax, and since you have no other savings the normal argument about losing the tax advantage if you take money out doesn't really apply. You could let it accumulate (up to 5k) in your current account - provided that the account is a Lloyds TSB classic with Vantage, and therefore earning up to 3% interest. Most of the above are only good for a year, so you then put the accumulated savings into a one year fixed rate account for the second year (if there's a good rate available at the time), and start new accounts for the second year's savings. You can put the monthly savings straight into a fixed rate account if you wish, but mostly you can't add to the account, so have to open a new one each time.

Laze

So transferring in just over a years time will definitely be on the board then.

As I will be inputting £500 per month (manually!) - as I will be looking to transfer in a years time, don't want to end up it still taking money out of my account when I have transferred, is the Regular Savings the best one? I know it's strict and I'll have to look around, but this Regular Savings up to 8% obviously sounds good. I think an ISA would work more with a high end lump sum (maybe after 1 year?) - As I said, I'm a total idiot at this. A total noob. I see you signature states over 1/2 a century - so let me call on your expertise please! - Where can I look for the best deals?

I've been looking here: moneysavingexpert.com/savings/best-regular-savings-accounts

and here: moneysavingexpert.com/savings/savings-accounts-best-interest#fixed

But as I say, I'm totally clueless, hence coming here.

Thanks for your help on this!!!

Eco_Miser

If you can meet the conditions, a Regular Saver is probably best. Remember to cancel the Standing Order afer the 12th payment, unless you want to continue on the then-current terms. There may even be Regular Saver ISAs.

While ISAs do work better with lump sums, if you're not otherwise using the allowance, you may as well use it for monthly savings - if the return is better than the alternatives.
You have to look around for the best on offer at the time, and also take a view on whether a fixed or variable rate would be better (ie are rates going to go up or down?). Remember to deduct tax if comparing taxable accounts with ISAs or NS&I's Index Linked Saving Certificates (also tax-free, and worth looking at main thread here)

Yes, I have been saving for over 50 years, but for most of that time it was simply a matter of looking for good rates in Bank and Buiding Society windows.

I presume you have read this.
You can also look at comparison sites like Money Supermarket and Compare the market and Confused

Laze

I have read what you presume, I wrote it in my post above you!

I'll have to get in touch more with you when the time comes, but for now, I feel more optimistic that this can work and I can pay my cards (around 23k altogether) and car off within 2 years

smartiedriver_2

Open a regular saver, which most banks permit for a maximum of £250 per month, for a period of 1 year. Most pay around 4%; HSBC pays 8% to some account holders. You can generally open more than one.

In 12 months' time, put the total saved from the regular saver, plus interest, into a Cash ISA (Santander is best as at today).

For the remainder, put this into a Cash ISA each month, and top up whenever you can (eg if you get any bonus) and also top up when your regular saver matures.

As to why ISAs are highly recommended on here, ISAs are best for tax-payers, and even better for higher rate tax payers, as the interest is paid without tax deducted.

Laze

Thanks for that smartie!

On £250 for 12 months, what would I be looking to get back at the end if it is @ 4% (not sure how tax works with it, which is a bonus for me too on ISA's as theres none to work out!)

On the ISA front, if I did open one at the same time and saved little bits and bobs, then moved that ISA and the regular savings into another ISA, would that eat that years ISA allocation, even though I had one and that is now gone? - I'm right in thinking it's one per year no matter what right?

Also, is there a calculator somewhere for ISA's. I know rate's change, but surely with no tax to calculate, it would be simple to just input the data on a fixed rate one and get exactly what you will be getting.

Finally!!!! - Is it like many things. They're good at the start (12 months) and then the rate falls off so you have to transfer?

Really helpful this is, i feel so much more clued up. Thanks again!!!

psychic_teabag

Laze wrote: »

On £250 for 12 months, what would I be looking to get back at the end if it is @ 4% (not sure how tax works with it, which is a bonus for me too on ISA's as theres none to work out!)

Martin provides an online calculator for regular savings here :
http://www.moneysavingexpert.com/savings/best-regular-savings-accounts#calculator

Laze

Excellent, I think regular savings is the way to go then come Jan. No doubt I'll dig this thread up when the time comes....

Guys. You're legends to me. I'm not worthy. Thanks!

Laze

I'm here a year on from this...

So, next month (beginning), I will have paid off my debts, and will be able to save circa £700 per month. I would like to put this into savings, however, split with a £400 and a £300 (so need to open 2).

From the above and getting back into reading it all again, I see I should be seeking a Regular saver, on both accounts. However, I need to be able to access the £300 one, so don't want to be punished for taking out of that and the other £400 one, I want the best rate going.

I read and understand there are no point to ISA's with such a little amount.

The question that may seem obvious is this... do you always have to STANDING ORDER / DIRECT DEBIT into a regular savings, or can you add what you want whenever?

Thanks.

MoneySaverLog

Instant access for your £300 one. First Direct 8% regular saver with the other £300, may be HSBC for the other £100 6%

Both banks you have to have their current account for it to work though and you have to pay a minimum of £500 into HSBC per month and leave £1 in a First Direct savings account (not regular saver) or pay in £1,500 a month to avoid £10 a month charge.

Both these regular savers require a standing order from their current accounts, but you could set one up to move the money from your main bank to HSBC to meet their £500 a month funding requirement and a SO out from there to FD and to their regular saver :-)