Best place to put this little lot? Wreckless student here...

apoorstudent

Bearing in mind that I earn less than the taxable income so am eligable for gross interest, what would be the best place at present to put my money? It's too tempting just sat there in my current account. I don't want to throw it all away on a car, or something equally wasteful...

I have £2650 student loan plus around £8000 (once my university funds are refunded in Feb. - isn't it annoying how places are on your back for money... yet when they mess up, it takes them months to get it sorted! o_0). Plus I'd like to be able to put maybe £100 or so in every so often.

At present, I have: a basic current account with HSBC (who, might I add, I ABHOR and only keep this account as it's attached to my paypal), a student account and a credit account with Lloyds.

I don't understand all the fixed/AER/etc stuff so... Non-technological jargon would be appreciated. As would any suggestions! Anything with incentives is a bonus

Edited to add: I just read about the Lloyds 8% saver. Does it mean the maximum I can open it with is £500?

Kilty_2

Since you don't pay tax on interest your best bet is probably an Instant Access savings account with ICICI or Icesave. 5.45% as far as I know, with instant withdrawals to your nominated current account.

Riviera_Kid

I would recommend the NS&I ISA http://nsandi.com/products/disa/index.jsp.

Although you don't pay tax on your interest now anyway, you can still put money in it now and will continue to receive tax free interest even when you start work in the future. It's also a better rate than Icesave or ICICI.

So I would put as much as I can in now (up to the £3,000 limit), and then from the 6th April put another £3,000 in.

Edited to add: I just read about the Lloyds 8% saver. Does it mean the maximum I can open it with is £500?

Yes, your initial deposit can be up to a maximum of £500. You can then put up to £250 in each calendar month. The Lloyds 8% monthly saver is a good account for regular monthly savings

apoorstudent

Yeah, my dad suggested an ISA... I think I'll fill up my allowance for this tax year with my student loan, and keep it separate from the rest of my money (I intend to pay the loan back as soon as I finish my course, I only took it to make some interest on it, hehh).

Apparentely I can get a better rate for the rest of my savings though... I'd prefer a 'real' bank so that I can go to a branch rather than doing it solely online.

EDIT: Can anyone tell me what the difference between 'cash mini ISA' and a 'direct ISA' is?

gt94sss2

apoorstudent wrote:

Can anyone tell me what the difference between 'cash mini ISA' and a 'direct ISA' is?

This shows the differences between the 2 different cash ISA accounts that National Savings offers.

Regards
Sunil

jamesd

apoorstudent, regular saver accounts fed from a high interest savings account (probably via a bank account middle step) will get you a higher interest rate, since you're not a tax payer.

You could also consider stock market fund investments in a stocks and shares ISA if your risk tolerance allows it, since you will presumably keep the student loan as long as possible if it's one of those at inflation-only interest. Get at least one different fund, in a different part of the world or different market sector, for each 1000 you put in, since diversification is the key to reducing the overall risk and maximising probable returns.

If your loan is at inflation only, you should aim never to pay it back, except to the extent you're forced to by the rules. You're likely to be able to earn more interest on the money than you pay for the loan for as long as you have it.

apoorstudent

Lloyds online banking is weird... For some reason it won't let me open a regular saver? Maybe it's because I have a student account, but it only gives me two possible options.

Riviera_Kid

You can't open a regular saver online - you either have to apply over the phone or via a branch.

I decided opening by branch would be easiest, but actually it took 3-4 trips until they finally got it right! My mum arranged it over the phone and it took 10 minutes, the only downside being she couldn't always understand the guy's accent. Either method has its advantages and disadvantages so you just have to choose the one which suits you.

Make sure if you do choose to open it in the branch that you take two forms of ID with you

moneyandmountains

Remember, that you can also if you are an undergrad get an interest free overdraft from your bank, which of course you can stick in a savings account. Just make sure that you don't go over your agreed overdraft, as the fees will obliterate the interest on the savings.

I am a currently a non-taxpayer as well.
In your situation, make sure you register for gross interest with an R85 at account opening, as otherwise you will need to claim the tax back.

Unless you think that a cash ISA is offering a tremendous rate of interest, then there is little point in putting your money in one until towards the end of the tax year.
Of course, using your ISA allowance is good for the future, but in the meantime if you can get better gross interest elsewhere, then do that.

I am unsure whether as a student you own your own house or not. Investing in the stockmarket is not necessarily something you want to do, for a number of reasons:
1) When you graduate, you are likely to have a load of setup costs, moving etc. possibly buying a house. Don't underestimate these.
2) If the amounts described are the sum of your savings, then investing even a £1000 could be a significant part of your savings.
3) As you are a student, you probably don't want to spend your time worrying about investments. More sensible to enjoy life and meeting interesting people.

Investing in the stockmarket is normally most sensible if you have a reasonable cash fall back position or a regular income. Put it this way, could you afford to lose the money or not.

apoorstudent

I don't even understand stockmarket anyway, so this is entirely out of the question!