Best way to earn interest with 6k?

RobLondon1984

I went to put a cheque yesterday, and the person ask me if I wanted to transfer my money into a savings account. I said no at the time, and did a bit of research, and realised that I could be earning quite a bit of money if I transfer my money from my student account to some sorts of savings account.

At the moment, I am earning 0.010% interest in my student current at Natwest, I have two other current accounts at Barclays and Abbey, and also earning similar interest. Bascially, I didn't bother or realised about different savings schemes. I am 22 now, if I realised ways of earning interest at say 13, I could have earned alot of money by now. All I have is like 0.10% interest on three accounts since my account was made!

Just want to know, whats the best way to earn interest with 6K, I have put 1k in an ISA at 5.25% this year. I should be earning around 1.3k a month, so I would want to invest with my future earnings as well. I also heard that when your employer pays you, it has to be through current account. I heard of telephone and internet savings account, but don't know much about it.

I don't understand these terms used by the banks and how they work, like Gross rate (p.a), AER, Net rate(p.a), Tax free P.A. I did ask at the bank today, but it was very confusing with all these rates and schemes.

As I am saving up for a MSC for 2008 entry, I want to save up as much as possible.

Thanks for any replies

tom188

I suggest you start by reading the savings articles on this site (see left), then come back with your questions.

faithless

Seconded. Also try reading the some of the info under 'Loans and Banking' on the left hand menu, as there's some good explanations of different terms such as APR, AER, Gross, etc.

Telephone and internet savings accounts tend to be able to offer better rates because they have less overheads to pay for - no branches, less staff, etc. They are usually linked to your current account, so you can just transfer money back and forth online or on the phone.
If the savings account is with a different institution than the bank account it's linked to, it will take around 3 days for the money to get transferred, so you have to plan ahead a little to make sure the money is back in your current account for when you need it.
Some accounts, esp those linked to your bank account, it seems, also have penalties for withdrawing money, e.g with the HSBC Online Saver you don't get paid any interest in any month you make a withdrawal, although most of the big institutions that offer mainly savings accounts have no such proviso, e.g. INGDirect, ICICI, Icesave.

jinkssick

were like at the same stage in our lives (both £ wise)

first thing with my money that ive done is £3,000 ISA.

If you have a gf (and she is trust worthy, just have to be said and sure of) then £3,000 in another ISA. All in all its £1,000 gained in interest from the 6k in one year.

tom188

jinkssick wrote:

were like at the same stage in our lives (both £ wise)

first thing with my money that ive done is £3,000 ISA.

If you have a gf (and she is trust worthy, just have to be said and sure of) then £3,000 in another ISA. All in all its £1,000 gained in interest from the 6k in one year.

I presume you mean to gift her the money and allow her to enjoy the tax free interest. If the money is still yours and she is harbouring it so you can use her tax allowance for your benefit then this is tax fraud.

Ian_W

jinkssick wrote:

were like at the same stage in our lives (both £ wise)

first thing with my money that ive done is £3,000 ISA.

If you have a gf (and she is trust worthy, just have to be said and sure of) then £3,000 in another ISA. All in all its £1,000 gained in interest from the 6k in one year.

Can you tell me which cash ISA pays 16.66% please? That's what it's paying if you got £1K interest on £6K over 12 months.

Come on, I need to know. The best I've seen NS&I at a meesly market leading 5.8% which gives you a paltry £348 interest on your dosh.

RobLondon1984

faithless wrote:

Seconded. Also try reading the some of the info under 'Loans and Banking' on the left hand menu, as there's some good explanations of different terms such as APR, AER, Gross, etc.

Telephone and internet savings accounts tend to be able to offer better rates because they have less overheads to pay for - no branches, less staff, etc. They are usually linked to your current account, so you can just transfer money back and forth online or on the phone.
If the savings account is with a different institution than the bank account it's linked to, it will take around 3 days for the money to get transferred, so you have to plan ahead a little to make sure the money is back in your current account for when you need it.
Some accounts, esp those linked to your bank account, it seems, also have penalties for withdrawing money, e.g with the HSBC Online Saver you don't get paid any interest in any month you make a withdrawal, although most of the big institutions that offer mainly savings accounts have no such proviso, e.g. INGDirect, ICICI, Icesave.

Thanks for the helpful reply

At the moment, I plan to put another 2k in the same ISA I have 1k in. I put the 1k in around august of this year, I think they start the interest from this april to next april. I am not sure whether it would just be 3k in one ISA, with interest starting this april, or whether its two seperate ISA, I would of though it would be a 3k ISA with interest starting in April.

I also plan on having another an telephone savings account rather than an internet account even if the interest rates are lower.

tom188

Interest is calculated on a daily basis.

You can only contribute to one ISA per tax year.

faithless

RobLondon1984 wrote:

At the moment, I plan to put another 2k in the same ISA I have 1k in. I put the 1k in around august of this year, I think they start the interest from this april to next april. I am not sure whether it would just be 3k in one ISA, with interest starting this april, or whether its two seperate ISA, I would of though it would be a 3k ISA with interest starting in April.

I also plan on having another an telephone savings account rather than an internet account even if the interest rates are lower.

tom188 wrote:

Interest is calculated on a daily basis.

You can only contribute to one ISA per tax year.

Basically you're allowed one mini cash ISA per tax year (April to April). However, the interest will be calculated daily from when you open the account (they might only actually pay you the interest once a year or once a month, but this does not matter as it does not affect the amount you recieve in total). You can put up to £3k in an ISA per tax year. Come the end of the tax year, you get a new ISA allowance, and you could put another £3k in. You could just add it to the ISA account you have with whichever institution, or open a new one. The best rate ISA at the mo appears to be the National Savings and Investment ISA, at 5.8%. And remember, that's tax free, so it's not 5.8% - 20% tax, which is what would happen if it were a 'normal' savings account, but is actually 5.8% you recieve.

You can also transfer your ISAs and retain the tax free status, so if you found a better ISA, you could transfer your old ISA to the new institution to earn the higher interest rate. However, you do have to check that

a) the new institution accepts transfers in (e.g the NSandI one mentioned above does not) and

b) that there are no penalties for transferring from your current ISA provider - just check the t's and c's. Oh, and you have to make sure you fill in an ISA transfer form, so the money goes directly from the old ISA account to the new ISA account because if ever the ISA money leaves its tax free 'wrapper' it loses its tax free status.

There's a very good explanation of how ISAs work here


Also remember, many accounts can be operated online and on the phone, so you don't need a solely-telephone based account, you just need an account with telephone banking facilities. The only real difference with internet banking is that instead of basically paying the wages of the person who carries out the transactions that you want made, you can do it yourself. And the banks effectively pass on the savings they make in not having to employ those people in the form of higher interest rates.
It may be worth you going to one of the banks' websites and clicking on their 'internet banking demo' button so you can see exactly how it works, it is pretty simple, so everyone can use it.

RobLondon1984

faithless wrote:

Basically you're allowed one mini cash ISA per tax year (April to April). However, the interest will be calculated daily from when you open the account (they might only actually pay you the interest once a year or once a month, but this does not matter as it does not affect the amount you recieve in total). You can put up to £3k in an ISA per tax year. Come the end of the tax year, you get a new ISA allowance, and you could put another £3k in. You could just add it to the ISA account you have with whichever institution, or open a new one. The best rate ISA at the mo appears to be the National Savings and Investment ISA, at 5.8%. And remember, that's tax free, so it's not 5.8% - 20% tax, which is what would happen if it were a 'normal' savings account, but is actually 5.8% you recieve.

You can also transfer your ISAs and retain the tax free status, so if you found a better ISA, you could transfer your old ISA to the new institution to earn the higher interest rate. However, you do have to check that

a) the new institution accepts transfers in (e.g the NSandI one mentioned above does not) and

b) that there are no penalties for transferring from your current ISA provider - just check the t's and c's. Oh, and you have to make sure you fill in an ISA transfer form, so the money goes directly from the old ISA account to the new ISA account because if ever the ISA money leaves its tax free 'wrapper' it loses its tax free status.

There's a very good explanation of how ISAs work here


Also remember, many accounts can be operated online and on the phone, so you don't need a solely-telephone based account, you just need an account with telephone banking facilities. The only real difference with internet banking is that instead of basically paying the wages of the person who carries out the transactions that you want made, you can do it yourself. And the banks effectively pass on the savings they make in not having to employ those people in the form of higher interest rates.
It may be worth you going to one of the banks' websites and clicking on their 'internet banking demo' button so you can see exactly how it works, it is pretty simple, so everyone can use it.

I have read the link and still unsure how it works.

If you say you are allowed one ISA from april till next april. I opened a 1k ISA in august, then I would be earning interest till next august? as you say interest is added when you opened your account? would I need to wait till next august to open another 3k ISA?

Would I be able to put another 2k ISA in the same place say this month, giving a total of 3k ISA? If yes, would you know how the interest is calculated? Would the interest be calculated as interest from the 1k ISA from august till now, and interest from the 3k ISA from January till now?

Thanks

tom188

You open the ISA account, and put in the money. You then earn interest on the money for as long as it in the account. If you want to put more in you can up to a maximum of 3000 per tax year (up to the 5th april). That money will also earn interest until you take it out.

You can then put another 3000 in in the next tax year (from the 6th april). This can be in your existing account or in a new one with a different provider.

A basic estimate of interest is Amount deposited * rate/100 * days in the account.

Alternatively look at the interest rate as being the amount of interest in pounds per £100 saved if you left the money in the whole year.

An ISA is just the same as any other savings account, apart from the maximum deposit and tax free status.