Short term money - where to put it ?

morganlefay

I am being paid £7,000 for a painting I have sold, in monthly cheques of £1800, (elderly lady, can't pay all at once, I was feeling kindly and she is a very prompt payer so it's all OK) and when the repayments get to £5,000 I need to pay that to my daughter, and will get to keep the other £2,000. So far I haven't cashed the 2 cheques I have already had, but need to do something sensible with them (now valuing £3,600). Savings accounts seem a bad bet but should I get a cash ISA ? I won't be touching it until it gets to the full £7,000 but when it does(about 3 more months) I will want to take it all out, but for now I want a safe place to park it which earns me a bit, if possible. Have no idea what to do. Sorry to be dim

psychic_teabag

Well, a savings account could give you 3%. An uncashed cheque gives you 0%. So savings account is at least better that what you're doing now, even if you then decide to move the money.

Interest is going to be fairly negligible whatever you do - call it 3% for 3 months on average balance of £4000 giving £30. (And you've pretty much already lost almost that much by not cashing the cheques - it's the money that would be in the account longest that earns most of the interest.)

ISA is best used for longer-term savings, if possible. But if you wouldn't otherwise be using your ISA allowance, using it for this is better than not using it at all.

Perhaps you should check with the elderly lady before you present the cheques - she can't pay all at once, yet when you present 2 or 3 cheques together, a large sum will be taken from her account in one go.

morganlefay

Thank you P.T. that's helpful, and you're right - a cheque sitting in a drawer is earning nothing. Please can you also tell me (I have read through Martin's guides and can't find the answer to this idiot question): if I put the money in a cash ISA does it have to have sat there for a year before the interest becomes tax free ?
(I'm just not used to having money to save, that's my problem) And I'm most grateful to you for help .

CLAPTON

in general, for an instant access savings a/cs whether ISA or not, you get the interest due for the period of time that you saved

so yes, put it in an instant access cash ISA (although the max you can put in this tax year is 5,640)

McKneff

You really should put cheques in the bank as soon as you get them.

If i send someone a cheque and then it is cashed 3 months down the line, I have forgotten about it by then so I think my current balance is the true balance. I know, I know, I should keep more of any eye on it but hey, it happens. And it could mix the poor old dear up too in the same way.