Saving account for a dummy

Mimi_Arc_en_ciel

Hi ,

Wonder if you could help me. I am looking to start saving some money and although I have read Martins guide, I am still baffled - im probably over complicating things!
I want to save at least £50 a month to begin with to see how I get on, maybe increasing it in January to £100. But I want to be able to add to it through out the year (For example, if i get a bonus from work)

Whilst I have a decent income each month, I always ended up wasting the money buying unnecessary things.

I have a current account with NatWest and would rather have my savings in a different account.

I do not have an ISA – although its probably too late to take advantage of a good rate with it being Nov i guess.

Could you please help and suggest something? I don’t understand the yearly gross/net rates, or bonus rates or tax free / taxable savings.

All i want to do is to be able to transfer money into an account, forget about it and have a nest egg for when I’m older.

Any help will be appreciated J

Thanks!

xylophone

Never too late to take advantage of an ISA and it may well offer a better rate anyway.

You can pay in up to this year's allowance (£5640) before April 6 2013.

In the new tax year you could continue with this account for the next year's allowance or look for an account with a better rate.
http://www.moneysavingexpert.com/savings/best-cash-isa

Consumerist

Mimi_Arc_en_ciel wrote: »

Could you please help and suggest something? I don’t understand the yearly gross/net rates, or bonus rates or tax free / taxable savings. . . .All i want to do is to be able to transfer money into an account, forget about it and have a nest egg for when I’m older.

Wow! That's quite a bit of ground to cover.

I would say your first priority would be to open an ISA for this year and put as much as you can into it before 6 April 2013.

The rates aren't that good at the moment but once you have put money into an ISA you will not pay any tax on the interest for as long as the ISA exists (Interest on an ordinary savings account is taxed at 20% before being added to the account). If rates improve in the future, you can transfer the ISA to get a better rate.

If interest is not taxed (as in an ISA) it is said be paid "gross" whereas if interest is taxed (as in an ordinary savings account) it's said to be paid "net" of tax.

You don't say what your marginal tax rate is but if you are paying 40% or more an ISA is even more valuable than to a basic-rate tax payer. i.e. you will not pay 40% tax on the interest.

If you want to add to the ISA each month then you would probably be better off with internet access unless you want to make deposits by post or in a branch.

psychic_teabag

Mimi_Arc_en_ciel wrote: »

Hi ,

All i want to do is to be able to transfer money into an account, forget about it and have a nest egg for when I’m older.

Unfortunately, forgetting about it is probably not going to give you any kind of nest egg. The best accounts have short-lived bonuses, and even the "clean" accounts that don't have a bonus are likely to become obsolete within a few years, paying only a nominal interest.

Mimi_Arc_en_ciel

Thank you all for the replies.

This is where I get confused with the marginal tax rates etc. Where do i find my marginal tax rate?

"forgetting about it" was probably the wrong way to describe what i meant - I understand you have to move the ISA's - I dont want to be able to see the account when i log into NatWest (If i was to open one with NatWest that is!) because i'll end up spending money. If i was to set up a standing order and treated it like a bill and couldnt see it daily (like i do my current account) then i would be more likely to save, and get in the habit of saving

Again, thank you for the replies

badger09

Mimi_Arc_en_ciel wrote: »

Thank you all for the replies.

This is where I get confused with the marginal tax rates etc. Where do i find my marginal tax rate?

"forgetting about it" was probably the wrong way to describe what i meant - I understand you have to move the ISA's - I dont want to be able to see the account when i log into NatWest (If i was to open one with NatWest that is!) because i'll end up spending money. If i was to set up a standing order and treated it like a bill and couldnt see it daily (like i do my current account) then i would be more likely to save, and get in the habit of saving

Again, thank you for the replies

If you work for someone else (ie you're not self employed running your own business) you can see your tax rate from your payslips or end of year pay & tax document (P60).

Unless you're earning over £42k then you'll be paying basic rate tax of 20%. In an ordinary savings account, 20% tax is automatically taken off by the bank or building society. In an ISA, no tax is payable.

Mimi_Arc_en_ciel

Ah no definitely not earning more than £42k (gosh wouldn't that be nice!)

So ISA's - I've had a quick nosey on MSE and I *THINK* this sounds ok..

BM Savings, 2.75% AER Post. Transfers allowed.

• Rate: 2.75% variable AER1.05% bonus for 15mths
• Min deposit: £1
• Interest paid: Annually only
• Allows previous ISA transfers? Yes
• Transfer out penalties? No
• Access: By post
• Safety: Shared £85,000 UK protection with the HBoS group

Should there be anything i need to look out for/ be aware of?

Thanks again!

psychic_teabag

If you are not planning on withdrawing any of the money, you could consider a notice account. Coventry have one paying 3.25% with 60 days notice. You still have immediate access to the money in an emergency, but there would be a penalty - this might act as a disincentive to spend it.

You could speculatively give notice at the end of February, in case there are better rates to transfer in March/April, but I think you can let the notice lapse and leave the money where it is if there's nothing better around. But you'd need to check that (or ask back here and someone will have a look).

CLAPTON

Mimi_Arc_en_ciel wrote: »

Ah no definitely not earning more than £42k (gosh wouldn't that be nice!)

So ISA's - I've had a quick nosey on MSE and I *THINK* this sounds ok..


BM Savings, 2.75% AER Post. Transfers allowed.

• Rate: 2.75% variable AER1.05% bonus for 15mths
• Min deposit: £1
• Interest paid: Annually only
• Allows previous ISA transfers? Yes
• Transfer out penalties? No
• Access: By post
• Safety: Shared £85,000 UK protection with the HBoS group

Should there be anything i need to look out for/ be aware of?

Thanks again!

post may be a problem or it may be a benefit