Is this a rational way of investing money for one year?

lonewolf123

Hi guys

I have some money to invest and I was wondering whether this is a rational choice to get the best out of it. I already have £5760 for my cash isa ready for 2 weeks time for the new period. I plan on getting the 2.5% ISA with Santander as I can’t transfer my previous ISA funds as its locked elsewhere from last year’s ISA (thank god given the rubbish rates this year!). 2.5% seems the best I can get for one year correct? I could lock it away for 2-3 years and get SLIGHTLY better rates but I’m banking on better rates next year hopefully…

I know S&S is an option but I don’t want to do it as I don’t want to lock my funds for a long time as hopefully I will be buying a house in 2-4 years time and generally S&S is a long term thing.

I then have a constant flow of income coming in and so I plan on getting the 4% HSBC regular saver. I will feed in £250 every month. I know that FD does a 6% one but I can’t get a 1st account as I don’t qualify for £1000 every month criteria so I have to make do for the second best and that would be a 4% regular saver with HSBC or something. Is this right?

Finally I believe I could probably afford to save £300-400 a month and so I will open a instant access account with nationwide with a 2% interest rate and chuck in £300-400 a month and I will drip feed the £250 in every month into my regular saver. I know of the current 123 account with Santander which gives 3% and the various perks but I don’t think I will benefit from it enough to open it…

Does this seem logical to you guys i.e it would be something you would do and do you think there are any better options out there than the ones I already mentioned?

ermine

Yes. You are saving money, not investing it. Investing implies taking some uncertain level of risk for a higher return, which wouldn't be a reasonable thing to do given the short term nature of your requirement.

Cash savers take a different kind of risk. When you come to buy your house your money will be worth less in real terms than what it is now, because the interest rates on offer don't compensate for the destruction of the value of stuff your money buys. To add insult ot injury the Government taxes you on your savings interest, so you get even less of it to compensate for the loss in value of your cash over time.

All this is so that the Government can try and reduce the National debt getting even bigger than it already is, and support the sky high price of housing by keeping interest rates low When you buy your house you will enjoy the upside of this, but while saving for it you take the shaft.

switch76

Get a Halifax Reward current account that pays you £5 per month (effectively 6% on this sum). Put in £1000. Set up 2 direct debits that are active each month.
Get a Nationwide FlexDirect current account that pays 5% for the 1st year. Put in up to £2500.

Make the accounts pay each other £1000 per month.

innovate

switch76 wrote: »

Get a Halifax Reward current account that pays you £5 per month (effectively 6% on this sum). Put in £1000. Set up 2 direct debits that are active each month.
Get a Nationwide FlexDirect current account that pays 5% for the 1st year. Put in up to £2500.

Make the accounts pay each other £1000 per month.

And get the First Direct 6% account - - - you do not have to pay in £1K a month in one go....and you don't even have to pay in £1K a month at all. See "Banking Fee Waivers" on http://www1.firstdirect.com/1/2/rates-and-charges/charges

Jevvers

You don't have to open a FD current account to get the regular saver, you can put a quid in their ordinary savings acc which gives you eligibility.

EDIT - you do have to open the current account but you don't have to fund it with £1500 pm - see below

Jevvers

Cross-post...

lonewolf123

innovate wrote: »

And get the First Direct 6% account - - - you do not have to pay in £1K a month in one go....and you don't even have to pay in £1K a month at all. See

It would be great if what I understood from that is what it means! Basically from what I understand is that the first 6 months is free from the £10 charge already correct? After the 6 months am I right in thinking as long as I maintain a balance of £1500 then I won't get charged the £10 as well because I definitely cannot hold up with paying in £1500 every month...So as long as I maintain a balance of £1800 every month because £300 gets fed into the regular savers then I am safe from any charges?

The only perk I miss out is the free £100 given to people who can maintain it...is this all correct?

Jevvers wrote: »

You don't have to open a FD current account to get the regular saver, you can put a quid in their ordinary savings acc which gives you eligibility.

Have I misunderstood the terms? Because on the apply section for the regular savers it states that you must have a first direct 1st account and that is the current account?

Can you show me where it states that even a savings account would work because then it would be great!

Jevvers

Apologies, I got it slightly wrong, although the effect is the same. You DO need a current account but, as Innovate says, you DON'T have to fund it with £1500 per month as long as you have an eligible other product. This includes their normal savings acc which you can just stick £1 in. I know because we have done it!

Our charges
Banking with first direct usually costs £10 a month, but we'll waive the fee if you pay in at least £1,500 to your 1st Account each month, maintain an average monthly 1st Account balance of £1,500, or hold a selected first direct additional product. Take a look at our interest rates and charges section for more details of other eligible accounts.

And

Banking fee waivers
You will not have to pay the Banking fee:
For any month in which you...
hold a first direct mortgage, credit card, personal loan, savings account (*excludes Regular Saver Account), First Directory, or first direct car or home insurance policy;

Hope that helps

lonewolf123

Jevvers wrote: »

Hope that helps

Thanks! If you don't mind me being annoying, does it matter which 'savings account' you open with FD? I'm on their site now and under their tabs for savings its got the 'Everyday e-saver' and the 'savings account' option. Are they both classed as 'savings account' to get the current account for free or is it only the 'savings account' option under the savings tab apply (I hope this doesn't confuse you)?

Its a bit ambiguous on this section so I hope I'm not asking a silly question .

Jevvers

Sorry, I'm not sure - best to give them a call, I've always found FD very helpful on the phone.

lonewolf123

Thanks for all the help you guys.

If any else was wondering the same thing as me on which savings account you need to open to get the current account for free for first direct then both the ‘everyday e-saver’ and the ‘savings account’ option is feasible as I have just found out over the phone. I opened the everyday e-saver as it gave slightly more interest (every penny counts!)

If anyone is interested I have also calculated the total interest I would get this year using all the help on this thread and I came up with:

Santander cash isa for one year @ 2.5% with £5760 = £144

First Direct regular Saver @ 6% with £300 every month according to the website is £93 after tax.

Halifax reward account by chucking in £1000 will net me £5 a month making it £60 a year.

Nationwide Flexdirect with 5% on first £2500 will give me £100 after tax.

This in total will give me interest of £397 this year.

With all this work and the sum of money I put in total is £12,860. The return is [(397/12860) X 100] 3.09% after tax…nothing to show off about but at least it beats the current inflation rate of 2.8% so my money isn't decreasing in value….

Thanks guys!