Saving £700 p/m. Help, first timer...

Laze

Hello,

Right after so much paid off in debts, I only have my car left on a monthly payout and rent.

Basically, me and the missus have £700 per month (£300 from her, £400 from me) that we can save starting October.

Can someone advise what is the best way to make this work for us? We will not need access to it.

I'm not sure how and ISA or a regular saver would be best. Do those high interest account still exist where if you don't touch it, you get a higher rate?

We both pay basic tax as we earn under the £34,370 limit.

If I need to state any more info relevant, please ask and I will answer and you're really going to help as a collective of people hopefully!

Thanks

unimaginative_user_name

There are still fixed rate ISAs which pay better interest than easy access but as you don't have a lump sum to save they wouldn't suit you at the moment. Usually when you open one of these you only have a couple of weeks to pay the money in and you can't add to it throughout the year.

You would probably be better off opening an easy access cash ISA each that you can pay into each month and then when you have paid in the maximum you can for the year you could shop around for the best rate fixed rate ISA and ask the new provider to transfer the funds from your easy access ISA in. Be careful that you do not attempt the transfer yourself as if you withdraw the funds from one account and pay them into another that would count as new ISA contributions.

There are regular savings products which pay higher rates of interest than ISAs but the interest would be taxed. However they can sometimes still work out better if the rate is high enough. You could pay into one each though there is a maximum you can invest in a year and at the end of the year transfer into a fixed rate ISA.

Having said all this if this is the only savings you have you should also think about an easy access account that won't pay loads of interest but could contain an emergency fund in case you have unexpected car or house repairs.

opinions4u

What are you saving for?

When will you need the money?

What pension arrangements do you have?

How much do you owe on the car loan?

There are numerous options out there, but answering these questions will narrow things down.

Laze

@ O4u...

Saving for several reasons. The main reason is becuase I don't have anything right now I want to buy that can nessetate me spending this spare cash I have (same with her, we both want to save so we can plan some things) - based on that too, we can asses our future more later on (perhaps moving abroad to her country)

In 3 years at the earliest (unless something bad happens like losing jobs)

No pension, just state (partially due to possibly leaving the country which I've always wanted to do)

Around £12k, I would like to save enough to be able to pay that off and get less interest then. But as it's not all my cash, would have to discuss it as we may want to put it towards something else earlier.

Laze

unimaginative_user_name wrote: »

There are still fixed rate ISAs which pay better interest than easy access but as you don't have a lump sum to save they wouldn't suit you at the moment. Usually when you open one of these you only have a couple of weeks to pay the money in and you can't add to it throughout the year.

You would probably be better off opening an easy access cash ISA each that you can pay into each month and then when you have paid in the maximum you can for the year you could shop around for the best rate fixed rate ISA and ask the new provider to transfer the funds from your easy access ISA in. Be careful that you do not attempt the transfer yourself as if you withdraw the funds from one account and pay them into another that would count as new ISA contributions.

There are regular savings products which pay higher rates of interest than ISAs but the interest would be taxed. However they can sometimes still work out better if the rate is high enough. You could pay into one each though there is a maximum you can invest in a year and at the end of the year transfer into a fixed rate ISA.

Having said all this if this is the only savings you have you should also think about an easy access account that won't pay loads of interest but could contain an emergency fund in case you have unexpected car or house repairs.

I'm sort of understanding about the transferring! lol. Being new, that kinda does make sense after reading a few times.

I am also saving myself (I earn more and will have more to save elsewhere (in a standard / easy access savings account) for my car repairs or whatever may happen) so really want a savings account that can be locked away for a higher rate of interest, but possibly have 1 allowance of withdrawal just in case of an emergency.

ISA's and savings are confusing right now as I don't have a lump sum, I want to just keep saving monthly for the next year and then decide when we have around £7000 saved. Even then I will be confused on what to do with that to make it work best.

unimaginative_user_name

You don't have to save a lump sum into an ISA. You can pay in your £300-£400 pounds a month until you reach your £5640 limit though not into a fixed rate account as these generally can't be added to after the initial deposit. Once you've reached your limit or the tax year is over (whichever is earlier) you could then looked around for the best fixed rate account and open that and ask for your balance to be transferred. If you are worried about being tempted to withdraw the cash go for a branch only account rather than an online one as it takes more effort to get at your money!

Incidentally the best rates tend to be available towards the end of one tax year and the beginning of the next so April 6th next year would probably be a good time to fix.

pledgeX

How old are you? Actually that's not really that important (although the older you are the more concerned I'd be about this), but as you don't have any form of pension (apart form the state) I'd definitely thinking about saving some money long term for that.

As you're not entirely sure what you'll need the money for and when, and it sounds like you don't have a buffer for emergency funds (as you mentioned about losing your jobs) then I'd suggest something within reach if needed.

I've got an instant access cash ISA for this very reason. I'm adding to it every month with the aim of saving ~6 months salary for nasty expensive things like cars, potential redundancy, illness, expensive breakages in the home etc. Once I've reached that figure, I'll alter my savings strategy. Maybe 50% in short term savings for fun but expensive things such as holidays, minor home improvements, then the other 50% for longer term savings where I lock it away for X years in order to get better interest rates.

ChopperST

Personally I'd (if you are allowed) overpay the car loan to get it paid off early. Providing this is a mainstream lender most allow you to do this and you will get a rebate of the interest due and you will also pay off the loan quicker, saving much more on loan interest than you would earn in interest on a savings account.

Once you are debt free get saving.

I'd echo others comments about having a small reserve in an instant access account for unforseen events (boiler breakdown, fence blowing over etc.)

Good luck!

Megabloks

ChopperST wrote: »

Personally I'd (if you are allowed) overpay the car loan to get it paid off early. Providing this is a mainstream lender most allow you to do this and you will get a rebate of the interest due and you will also pay off the loan quicker, saving much more on loan interest than you would earn in interest on a savings account.

Once you are debt free get saving.

I'd echo others comments about having a small reserve in an instant access account for unforseen events (boiler breakdown, fence blowing over etc.)

Good luck!

Unless I have missed it, that is on the basis that it isnt an interest free credit car loan, in which case you will be losing the interest you would be gaining by having that money in an interest paying savnigs account.

Laze

I am aware that I can pay back the car etc, but as I'm nota total !!!!!!, I'm not going to decide what to do with our money, it will have to be a joint decision. If we see a house we like, if something else happens at the time (baby etc.) or anything else horrible, these could all stop me from buying the car loan off earlier. I know I won't get a penalty as I've spoken to VW finance already. However, of course it's far appealing when you get the "less interest quote" and realise how much you'd be "saving" via not paying it in interest.

The only thing I really want here is what is best to be saving circa £700. I know I have mentioned about no pension in response to a question, but being blunt, all I wanted was an idea of what is the best way to save. I'm not asking about a pension. What I want is to save what I stated and as some good points show here, I am getting ideas. So thanks for those.

But to re-iterate. I don't know what my future holds. If I get made redundant I am under 30 (just!) and have 9 years worth of pay-off to come and after going through it once (risk of redundancy) and seeing what my figures for pay-off were, I know now I got one of the re-structuring jobs on more money that I will actually be looking at least £10k. So that's not an issue. However, life is life, so I still have to plan in case something bad happens. So would like to be able to put the £700 p/m into an account with 1 allowed withdrawal per annum.

Has anyone got the 8% FD saver? I will call them I think as I've been reading it more and seems I just need to get a normal account and that's it. Plus paying £1500 p/m would get £100 after 3 months (a bonus I did not expect!)

Thanks again for those not intruding too much in what doesn't need to be discussed

Laze

Sorry, quick question on an ISA.

After 12 months (I'm looking at taking the Tesco one out 2.3%), after 12 months, this time next year, I can withdraw all the money after my interest payout and then just bump that into another ISA? Or do they take a fee for withdrawing as I'm seeing for transferring there is a 30 day interest fee, which if it's after 12 months is kinda hard to take.

Sorry for the nab question, but I wanna get this right.