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Graduate with first proper job...maximising interest

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Hi Everyone, first time poster here - I wanted some advice from like minded individuals rather than biased banks!

I graduated in July 2011 and have just landed my first full time job doing what I love. My salary is £18,000 per year and equates to £1208.50 per month in my bank (net of tax, student loan and national insurance). I have devised a financial plan for myself and was wondering if anyone could comment on the good or bad or possible improvements to it. Here we go:

Move current account from HSBC (0% AER) to Lloyds TSB Current Account Smarter With Vantage (2% interest on balances over £1000).

I am able to save £500 per month, therefore I was going to set up a direct debit to have £500 transferred to an ING Direct Savings Account (3.03% Interest for 12 months) and of course, adding £500 per month.

For Lloyds I calculate that 2% of £1208.50 is £24.17 per month, equating to £290.04 per year.
For ING I calculate that 3.03% of £1000 (interest only accrued on balances over £1000) is £30.30 and would be cumulative every month, gradually increasing with more money in there. (I will also store the initial £1000 in a different account until I am ready to open the ING account, ensuring I get 12 months maximum interest)

Any feedback would be greatly appreciated - I am simply trying to maximize the amount of interest i can accrue. I am never in an overdraft and keen to save! (My degree was not in Maths so apologies if I have missed something! - I am here to learn)

Kind Regards
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Comments

  • jalexa
    jalexa Posts: 3,448 Forumite
    edited 23 March 2012 at 8:25PM
    therefore I was going to set up a direct debit to have £500 transferred to an ING Direct Savings Account

    Be aware the ING account does not offer UK FSCS deposit protection but European "passport" protection.
  • jalexa wrote: »
    Be aware the ING account does not offer UK FSCS deposit protetion but European "passport" protection.

    Many thanks for that advice - can you recommend a comparable savings account which is easy access?
  • CLAPTON
    CLAPTON Posts: 41,865 Forumite
    10,000 Posts Combo Breaker
    it would be better to save in an ISA as this is tax free otherwise your 3% becomes only 3% x 80% i.e. 2.4%
  • CLAPTON wrote: »
    it would be better to save in an ISA as this is tax free otherwise your 3% becomes only 3% x 80% i.e. 2.4%

    Many thanks for that advice - i would never have known that! Which do you think would be the best ISA for me? Is it as simple as highest interest Vs penalties and ease of access?
  • jalexa
    jalexa Posts: 3,448 Forumite
    ... can you recommend a comparable savings account which is easy access?

    The Virgin Money/Northern Rock one perhaps?
  • gingerscot
    gingerscot Posts: 52 Forumite
    Part of the Furniture Combo Breaker
    Hi there,

    Congrats on the new job:) It's an amazingly feeling when you get that first fulltime post after graduating especially when you'll know you'll love the work.

    Unfortuntely I've got some bad news though! ..your maths is wrong.

    The Lloyds current account at 2% interest over balances of £1000 interest means that if you had £1200 in your account for a year you'd get £24 interest a year. Ofcourse you will never have £1200 in there as your rent will be out, bills, food, live costs so the actually interest will be at best probably half of that (£12 a year or a £1/month) since the interest is calculated every day. The 'A' in APR stands for Annual, no bank will never display interest in a monthly % as it will look so low and I don't think they allowed to anyway.

    If you do have more than that in then you want to transfer the money to your ISA/savings as you'll get a better rate.

    Again with the ISA, you will get 3% of the average balance over the year so it would be £30.30/year or £2.50ish/month.

    Good luck saving but if we all earned £290/year of interest on £1208 then nobody would be on this board to reply:D

    And especially good luck saving £500, I know I'd struggle to live of £700 a month especially with rent/bills to pay. Do you live at home?

    Thanks, Dave
  • opinions4u
    opinions4u Posts: 19,411 Forumite
    Look in to HSBC regular saver account paying 6% interest (if you've kept the old account open). Or even First Direct version paying 8%.

    Remember to divide by 12 when calculating monthly interest ;) .
  • gingerscot wrote: »
    Hi there,

    Congrats on the new job:) It's an amazingly feeling when you get that first fulltime post after graduating especially when you'll know you'll love the work.

    Unfortuntely I've got some bad news though! ..your maths is wrong.

    The Lloyds current account at 2% interest over balances of £1000 interest means that if you had £1200 in your account for a year you'd get £24 interest a year. Ofcourse you will never have £1200 in there as your rent will be out, bills, food, live costs so the actually interest will be at best probably half of that (£12 a year or a £1/month) since the interest is calculated every day. The 'A' in APR stands for Annual, no bank will never display interest in a monthly % as it will look so low and I don't think they allowed to anyway.

    If you do have more than that in then you want to transfer the money to your ISA/savings as you'll get a better rate.

    Again with the ISA, you will get 3% of the average balance over the year so it would be £30.30/year or £2.50ish/month.

    Good luck saving but if we all earned £290/year of interest on £1208 then nobody would be on this board to reply:D

    And especially good luck saving £500, I know I'd struggle to live of £700 a month especially with rent/bills to pay. Do you live at home?

    Thanks, Dave

    Thank you so much Dave - I rang up ING and Lloyds and they we so unclear I appear to have completely misunderstood what they meant! ISA's seem to be the way forward but the whole inability to ay back in once you draw out...bit confuses me - I wanted something that i could regularly save into and withdraw if i needed it.

    By the way..I do still live at home and don't have a car to run...i bought my iPhone outright from eBay and spend £10 per month with Three Pay as you go...I also haggled the full sky package with no movies or sport down to £20 per month so they are my only outgoings. I just want to save as much as possible whilst the situation is this favorable!

    Kind Regards
  • innovate
    innovate Posts: 16,217 Forumite
    10,000 Posts Combo Breaker
    Many congratulations to your job, and to taking the initiative to get on top of your finances right from the word go!

    You have got a lot of good things already on the go. Below some suggestions you might want to consider in addition:

    Current accounts: Lloyds looks good, but you could perhaps ADD a First Direct Current Account (£100 for opening one). Maintain the minimum balances / deposit requirements with Standing Orders. (You can have umpteen current accounts - - use one as you main account, and the others because of the benefits they offer. Just make sure you know where your money is at any one point in time....a simple spreadsheet is your friend, or look for an old copy of Microsoft Money (think Amazon might still sell reputable copies).

    Savings: Read up on the main site about Regular Savers - you could probably benefit from the FD 8% one.
    Also, make sure you understand that ING is not protected by the FSCS scheme, but by some passport arrangement.

    You should also most definitely look at a cash ISA because that will pay you interest tax free. Good summary of what's available

    The other thing you can't consider early enough is your income in old age. It takes a heck of a long time to save up for a decent income when you eventually stop working, and it is ever so easy not to think about old age when you have only just started your adult life. But the earlier you start, the happier you will be with yourself when you eventually get there! Good advice on the CA website. You probably have a pension arrangement through your company but you should review whether you are maximising your options. May be pay £25-£100 a month into a SIPP? Be very careful though, there are loads of sharks out there who just want your money!

    Given you are a maths graduate, you won't have any probs with the numbers, and should easily be able to digest the T&Cs. You just need to shop around a bit more to get a really good grip on what is available in the market.
  • innovate
    innovate Posts: 16,217 Forumite
    10,000 Posts Combo Breaker
    jalexa wrote: »
    The Virgin Money/Northern Rock one perhaps?

    NO NO NO

    The Virgin ISA is, firstly, a Stocks and Shares ISA. May be you just want a cash ISA to start with.

    More importantly, though, the Virgin ISA has historically been one of the worst performing ISAs. You never get the best deal from a S&S ISA from a financial outfit - - - what you really want to do is a self-select ISA, using a funds supermarket. Read up about stocks and shares ISA separately.
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