Help with knowing where and how to save

djmsemcgrath

I'm getting a little lost and confused knowing how and where to save, and would appreciate some pointers or information.

At the moment, I have a normal HSBC bank account, and there is around £10,000 in there. I have no other debts, no credit cards, no nothing. Every month, the bank balance increases by around £3,000 a month.

My first port of call was to look into ISA's, as I read Martin's advice that ISA's should be the first savings option. I read http://www.moneysavingexpert.com/savings/best-cash-isa and it looks like the majority of ISA's pay around 2.25% interest.

If I transferred £5,760 into an ISA, over a year, I'd earn around £132 interest. Not exactly massive, but better than not.

I then looked at Savings Accounts, and some pay 3%, with Nationwide's FlexDirect paying 5% for £2,500, which on paper, seems to be higher than the ISA's.

Why are ISA's considered better than savings accounts? I understand it's tax-free, but if the percentage is a lot higher, doesn't this balance things out?

Would people put £5,760 in the ISA, then split the rest between other accounts, i.e., £200 a month in a Regular Savings (which seem to be limited to £3000 a year) then some in a savings account, etc.

There's so many options, so many exclusions, so many different types, it's a bit confusing.

Does anyone recommend something in particular, or at least something for me to investigate?

As I've been banking with HSBC forever, I looked into their options, but their interest rates are so far below the ones quoted on the ISA's page here, there must be a mistake or it's a different type of account.

Thanks in advance for any information - anything that helps clear my mind would be much appreciated.

jimjames

You pay tax on interest outside an ISA so if you are a 40% taxpayer then you'll have more to pay. Inside an ISA you don't worry but if there is a better rate on a normal savings account then there isn't a rule to say you can't take it. Just remember that an ISA allowance is lost after the tax year if it isn't used so if circumstances change you can't suddenly put all your savings into an ISA.

If your money is increasing at such a rate you may find it worth looking at other options like pensions or S&S ISAs depending on your situation.

sharpe106

It also depends on how much of the 3,000 are you planning on saving each month and if you need access to it any time in the near future