Student saving ISA or high interest - whats the best option

Misty80

I'm a PhD student with a reasonable tax free Stipend (lucky me) but fear it may run out before i finish so am looking to set up a savings account incase the worst happens. I'm new to this saving business and not really sure what the best course of action is since i am a student and subsequently dont pay tax on my stipend and so an ISA might be pointless if i can get better interest rates elsewhere. can anyone recommend whats the best way to get the most out of the little money i can spare at the moment?

thanks

jinkssick

ISA means tax-free basically, but its maximum is £3,000

Icesave pays 5.7% (£1 to 1 million) and A&L direct saver (5k to 100k and pays 5.8%). this is before tax so 5.7% of Icesave becomes roughly 4.2% after tax

It should go ISA>Monthly Saver (check banking section as some pay 8%)>The ones I mentioned above

CLAPTON

if you have no taxable income then look for the highest AER interest rates you can find... at the moment ISAs tend to have lower interest rates than internet saving a/cs

make sure you fill in a R85 to get the interest tax free.

as a PhD student do you do an potential taxable work (teaching, marking etc which may take up your tax free allowance.).. if so the ISA may be a better bet.

missile

Also you ought to consider future income. If you can afford to, it might be useful to utilise your ISA allowance for tax free income in future years when you presumably will become a tax payer as if you do not use it this year ISA allowance cannot be back dated.