Saving account (for beginners)

Hold_on

OK so I've been working for a year since graduating and all my money has been going into my standard account. I want to have a different account to put some money into and save money, however, I am completely dense in this area and have no idea where to start. My aim is to eventually put a deposit down on a place at least. I also aim to put in about 10% of my monthly salary into this account.

Can anybody help me and point me in the direction of a good account to put some money into?

innovate

Do you pay utility/phone bills by direct debit? If so, have you got a Santader 123 account? Could save you some extra money, without even specifically 'saving'. Plus, it's one of the few current accounts that pay a some interest - more than many savings accounts. Also, Quidco promise £45 for opening the account.

Savings interest rates are pretty dire atm - though this should not keep you from starting to save. If you have saved loads, you wil get better interest on loads as soon as the rates go up again!

Generally, you get best savings value with ISAs (because you don't pay tax on the interest) but only around March/April/May time. A better choice for saving up are perhaps Regulars Savers, and specifically the First Direct one at 8% AER.

You didn't say how much you expect to save each month, how old you are, whether you have any debts or savings, or whether you save into a pension. If yuou are happy to share more info, people might be able to provide additional suggestions.

Hold_on

innovate wrote: »

You didn't say how much you expect to save each month, how old you are, whether you have any debts or savings, or whether you save into a pension. If yuou are happy to share more info, people might be able to provide additional suggestions.

(had to delete a lot of the post cos of the links)

Yeah more info would have helped, my apologies. I plan on putting about £250-300 a month into it. Am 22, have no debts besides a student loan and no other types of policy where I've got money going out. I'm also living at home so have little going out except my phone bill and the SKY bill which I pay.

Thing is, I am completely dense in this area and am a bit worried about walking into a bank or something and get basically BS'ed into joining them.

My main aim is to have, in a few years, enough to hopefully put a deposit down on a place or if things go wrong, have something to fall on. What would you (and others) suggest?

AppleMatt

Hi Hold On

No need to put yourself down so much - financial products are dazzling in their perceived complexity, and are set up to confuse, in the hope you'll just accept whatever your "main" bank is offering (a pittance, usually!).

It sounds like you have two more suitable paths: an ISA, or Regular Saver.

An ISA saves paying 20% tax (or 40% if you are a higher-earner) on the interest earned on your savings. This doesn't magically mean you get more interest, as some other accounts may pay more, you just have to look around.

A regular saver requires a payment each month, and you can normally only access it after 12 months (or you're maybe allowed one withdrawal during the 12 months).

A good website to see the "top tables" is http://www.saversfriend.co.uk

Looking at that, the best ISA account where you can easily access your money is Marks and Spencers at 2.75% (tax-free).

As mentioned, for Regular Savers, First Direct offer 8% (before tax is taken off) , and others are offering 6%, 4%, etc.

Your other option is a bog-standard easy access account with any bank or building society. Rates are really low at the moment, and regular savers/ISAs are offering more as they expect you will keep the money with them longer, and it's more predictable for them.

The best easy access account, where you will pay tax on the interest but can move money in and out as you like, are either M&S or the Post Office, at 2.35% (before tax).

I hope this helps, good luck saving - it is very rewarding!

Hold_on

Hi AppleMatt, thank you for help. Nicely narrowed my options down a bit. What would you say is better then for somebody in my situation, an ISA or Regular Savers? Accessing the money in the next 12 months or whatever isn't so high on my priorities.

I used the moneysupermarket saving calculator, but should I use the suggestions they say?

AppleMatt

Hold_on wrote: »

Hi AppleMatt, thank you for help. Nicely narrowed my options down a bit. What would you say is better then for somebody in my situation, an ISA or Regular Savers? Accessing the money in the next 12 months or whatever isn't so high on my priorities.

I used the moneysupermarket saving calculator, but should I use the suggestions they say?

No problem I'm no expert, though!

With an ISA, you can only deposit £5640 until April 2013. After that, between April and the following April, you'll be able to deposit £5760 only.

Regular Savers also tend to limit the amount you can deposit, normally around the £250/300 mark so you should be OK with those too. I guess this is the point where it's up to you to decide which sounds like a better idea for you - not much difference in it

If it were me, I would be opening either an ISA or a bog-standard easy access, and transferring the money to a new ISA in April as the rates do become more attractive around April 6th, as it's a new tax year.

This would also give you a bit more time to read up and plan for the future? :beer:

AppleMatt

I forgot to add - moneysupermarket have a financial incentive in you picking the accounts they show - not necessarily a bad thing, just keep it in mind

Hold_on

AppleMatt wrote: »

No problem I'm no expert, though!

With an ISA, you can only deposit £5640 until April 2013. After that, between April and the following April, you'll be able to deposit £5760 only.

Regular Savers also tend to limit the amount you can deposit, normally around the £250/300 mark so you should be OK with those too. I guess this is the point where it's up to you to decide which sounds like a better idea for you - not much difference in it

If it were me, I would be opening either an ISA or a bog-standard easy access, and transferring the money to a new ISA in April as the rates do become more attractive around April 6th, as it's a new tax year.

This would also give you a bit more time to read up and plan for the future? :beer:

Thanks a lot for the help. Even though you say you are no expert, anything compared to my level of knowledge in this subject is expert.

Just to clarify (sorry), by bog standard do you mean a regular savers or an ISA like the M&S one you highlighted earlier?

innovate

Hold On, you would get most interest if you could do the First Direct Reg Saver. When it matures, put the proceeds into an ISA (that you might have opened in April next year, to secure the best interest rate). If you have any extra money to save, put that straight into an ISA - but make sure you get one that 1) pays best interest, and 2) lets you make unlimited deposits.

If you pursue the FD Reg Saver, and assuming you aren't with FD right now, consider that you can get £100 if you use their Switcher Service. Nice little bonus to get.

The Santander 123 doesn't sound right for you. But you could look at Lloyds or BoS Vantage current accounts, they pay a bit of interest as well, but don't cost anything, and they don't pay cashback.

Another thing you should consider is your income in retirement. It's a loong time away, I know, but the sooner you make provisions for it, the more money you will have when you retire. You get tax relief for pension provisions, but in return you have to lock up the money until you are at least 55 (and may be later, they keep raising the age). Hope your employer is offering to contribute to a pension? May be up your own pension contributions by £50 or so a month.

innovate

Be careful with M&S - - look for other posts on the board.

There have been reports about difficulties depositing money, and they will also drop their ISA rate before long.

I don't have any accounts with them myself, so can comment from experience. But I have always found some better interest rates elsewhere so far.

Hold_on

innovate wrote: »

Hold On, you would get most interest if you could do the First Direct Reg Saver. When it matures, put the proceeds into an ISA (that you might have opened in April next year, to secure the best interest rate). If you have any extra money to save, put that straight into an ISA - but make sure you get one that 1) pays best interest, and 2) lets you make unlimited deposits.

If you pursue the FD Reg Saver, and assuming you aren't with FD right now, consider that you can get £100 if you use their Switcher Service. Nice little bonus to get.

The Santander 123 doesn't sound right for you. But you could look at Lloyds or BoS Vantage current accounts, they pay a bit of interest as well, but don't cost anything, and they don't pay cashback.

Another thing you should consider is your income in retirement. It's a loong time away, I know, but the sooner you make provisions for it, the more money you will have when you retire. You get tax relief for pension provisions, but in return you have to lock up the money until you are at least 55 (and may be later, they keep raising the age). Hope your employer is offering to contribute to a pension? May be up your own pension contributions by £50 or so a month.

Thank you innovate. I am actually very happy I came onto this board for help. I think First Direct Regular Saver seems to be a decent option but obviously will look into it a bit more tomorrow. I feel silly that I left it this late instead of starting one earlier, better late than never I guess.

The pension has been another consideration. My company do provide the contributions but haven't actually set it up yet. My plan was to start, looking at least, at proper pension policies once this is sorted. No doubt you'll see me back here asking for help again