Short term savings

Bluefox_2

I have some money that I want to invest for about ten months before using it towards a property purchase next year. Looking at the various instant access savings accounts, I notice some pay interest monthly and some pay annually. I understand about the effect of compounding on monthly interest but, if interest is paid annually, what happens if I keep the money in the account for less than a year?

psychic_teabag

Interest is calculated daily. Whether it is credited monthly or annually, it is yours, and will be credited when the account is closed.

Watch out for bonuses, though : sometimes they are credited on the anniversary only if the account is still open. (In that case, you can just leave £1 in the account until the bonus is paid.)

Bluefox_2

Thanks psychic teabag. Most of the best rates do seem to include a bonus, so I will remember to keep the account open until the anniversary.

psychic_teabag

It's not always necessary to keep it open - often the bonus is just in the form of a higher rate during the first year, and if you close early you will get that rate. But sometimes the bonus is separate and payable only if the account is still open. Just need to read the T&C.

I'm quite bad at closing accounts (since it's often non-trivial) - end up with various accounts containing £1.

uksavergirl

Bluefox wrote: »

I have some money that I want to invest for about ten months before using it towards a property purchase next year. Looking at the various instant access savings accounts, I notice some pay interest monthly and some pay annually. I understand about the effect of compounding on monthly interest but, if interest is paid annually, what happens if I keep the money in the account for less than a year?

Hi, I went for premium bonds, plus income bonds from NSandI.. Probably not the best rates around, but really easy and not bad return. I do intend to continue to shop around and try and find a similar product with a better interest rate, but as it seems to be taking me so long, I think it's a good idea to have it doing something while I search!

uksavergirl

OK so it turns out this is the wrong thing to do. As I have transferred the money out into a personal name, it becomes subject to a tax liability.

I have not gone ahead with the income bonds as planned, and am looking for a business account that I can invest in instead. Maybe just go for the 1 year fixed rate bond from Santander - which is 3.2% - and hope that we don't need access to the money within the year.

I have tried to find a list of up to date business savings rates and accounts on the website and forums, but information seems a bit sparse on the subject - or massively out of date.

Can anyone point me in the right direction?