Where to start?

shaund316

Hi everybody

I graduated from university almost a year ago and was fortunate to land a job that's allowing me to start to build up some savings.

My question is - how can/should I save it? I opened an ISA with Halifax a few months ago without realising it was only allowing me to pay in for a 60 day period, which has since expired.

I was thinking of opening another ISA for savings, but as the interest rates are quite low at the minute would it be worthwhile to dip my toe into investing in other ways? The only problem is I'm quite risk averse!

Ideally I want to invest for the medium term as I'm hoping to save up to get a mortgage in a few years.

Any advice you guys can pass on will be much appreciated - I know little about finance so I'm all ears!

Shaun

CLAPTON

you can only contribute to one ISA in any one tax year

what interest rate does you ISA offer

put the rest of your money in the best rate ordinary saving a/c available

Lokolo_2

If you are able to save monthly amounts rather than a lump sum, then a regular savings account might be a good option to consider. The only downside is the limit to how much you can deposit monthly, however you could have more than one. See the link for latest rates of interest.

As Clapton said, an instant access savings account could be your next choice, either to add the maturity balance of your regular saver to after a year, or just solely using it from the beginning and adding to it whenever you can.

As you said you are risk averse, Saving rather than investing would make sense, otherwise you may risk losing part of your potential house deposit! Also, investments are for the longer term if you truly want to benefit from them so it's not advisable for your circumstances.

In addition, as an aside, it may also be worth looking at your outgoings and seeing where you can possibly reduce them so that you can put more towards your savings. You would certainly appreciate this when it comes to getting the mortgage as you'd be able to put a larger deposit down for a place.

shaund316

Thanks for the advice

I think I'm going to stick with savings as advised! As for reducing my outgoings, being at university for the last few years has made me quite good at being frugal!

lippy1923

When you say you opened an ISA a few months ago, I take it that was last tax year? Have you contributed to it this year? I.e after 6th April 2012?

If not then you could open a new ISA this year.
I would start building an emergency fund in an instant access cash ISA, keeping it tax free for years to come. Wait until you have a nice amount saved in cash before you start investing.

Have you got a pension all set up with your employer? If not start one as most employers contribute as well and you get tax relief on your money. Start planning for the future early and it should be easy.

If you can fill your cash ISA quickly, then maybe look into S&S ISA aswell, which is still tax free and you get your wish to gamble in the stock market.

I personally put all my money in cash ISA savings, whilst saving for a deposit. I did not like the idea of some of my money being eaten up from bad market conditions.

Good Luck

innovate

lippy1923 wrote: »

When you say you opened an ISA a few months ago, I take it that was last tax year? Have you contributed to it this year? I.e after 6th April 2012?

If not then you could open a new ISA this year.

even if there was a contribution since April 6 2012, Shaun can open another ISA - provided that all money pertaining to 2012-2013 gets transferred into the new ISA before any additional money gets paid into it.

The new ISA could be with a different or the same provider, and any transfer must be done by the provider of the new ISA.

However - it sounds like Shaun has opened a fixed term ISA. There might be a penalty for early withdrawal/transfer of the ISA he has already opened, and this might make a transfer financially unattractive.

Always read the smallprint

psychic_teabag

If you've only paid in a little, the exit penalty may be small (usually it's in terms of an amount of interest, and interest on a small amount is a small amount). Sometimes it's a fixed penalty (I think M&S do that ?).

So might still be worth transferring to an instant-access acct to allow it to be topped up.

If you'd prefer fixed-rate, new provider might provide a similar window to allow additional payments after it arrives. Or could transfer to instant-access now, and then again to a fixed-term once it's full.

Note that some regular savers pay more than an ISA, even though tax has to be taken off. A reg saver at 4% is equivalent to ISA at 3.2% for basic-rate taxpayer. So could just accrue savings in one of those and use it to put into ISA next year. (You would miss one year's ISA allowance, but if you continue the process, you'd be filling each ISA at the start of the tax year and so benefiting that way.