Confused!! Starting to save, but no idea how!

fmhm

Hi

After reading every article on this website with regards to savings, I still have no clue what to do!

Here's my situation.

My father-in-law, being the kind man he is, gave us a loan to buy a house, he paid the whole thing off in cash (by giving the money to my husband and the house now belongs to us).

He said that we can pay him back however and whenever we want to, as long as we know that we have to make some sort of financial payment so we don't get too comfy sitting in a paid off house with no rent to pay.

Anyhow, we have decided to pay him £675 per month (our previous rent amount) and then whenever (literally whenever so more longterm than short-term ) we would give him a lump sum every so often.

Now, how do I go about putting away £675 per month, and hopefully let it grow and work for itself while it sits there. We would not be withdrawing at all, and DH and I are on the same wages, we also have 3 kids (all under 16).

pls pls pls help!
thank you! :think:

psychic_teabag

You say you have decided to pay him £675 per month, but then ask where to save it. I assume this means you are not handing over £675 every month, but will pay him the equivalent of £675 per month, but bundled into larger pieces.

The simplest approach would just be to open the best instant-access ISA you can find, and put the money into that. Then it will earn interest tax-free. Since you don't plan to withdraw it, a notice account sounds ideal : eg Coventry are offering 3.1% I think.

An alternative would be one or more regular saver accounts. They are taxable, but can give higher returns even after the tax is deducted. e.g. First Direct offer 8%. You could then give him the money each time the account matures (usually after 12 months). Regular savers tend not to give access until maturity.

fmhm

Thanks for your reply.

since the total per year would come to £8100, would you say that it would be better to save it into two ISA's (one in my name, and the other for DH)?

or the whole amount into a regular saver?

psychic_teabag

Yes, you'd want an ISA each to fit the whole balance. Maybe start new ones come April, since rates might be better. But plenty of time to prepare for that.

EDIT: just noticed that the Coventry one only allows deposits until 5th April, so you'd have to start a new ISA after that. But you could leave the old one ticking over earning 3.1% until the bonus expires next November. Or put notice in for a transfer if a better rate appears.

Regular saver accounts tend to limit how much you can put in. So you might need two or three. e.g. the first direct one is max £300 per month. See https://forums.moneysavingexpert.com/discussion/608697 for a list of regular savers. Many are branch-only, so it will depend where in the country you are.

bigfreddiel

"anyhow, we have decided to pay him £675 per month"

just do what you say you're going to do - pay him

also pay as much as you feel you can into an isa or regular savings account each month and in april handover a nice little lumpsum

simples

fj