Savings/ISA's

GwylimT

So, I must admit as a man in my late thirties I have never had an ISA or a proper savings account and it is really time that I changed this.

I would like some advice about the benefits of both, generally which would be considered better?

We aren't high earners, but from September I will be working full time where as I now work part time and so we are intending to save all of my extra monthly income, as we can live on our current income so we think its better to just save it.

My wage will be doubling and so after tax I will be bringing in £900 more a month and so we will be putting all of that away. If you were in this boat, what would you go for?

innovate

I assume you have no debts, no mortgage?

If so, general wisdom is that you should have 6-12 months of living expenses in ready cash. You can do this in savings accounts (incl ISAs) or current accounts. Current accounts are paying slightly these days.
Read http://www.moneysavingexpert.com/savings/ and the forum

Next most important thing after your rainy-day fund is to sort out your pension. Where will your income come from once you are no longer working? Will it be enough to live from? Does your company have a pensions scheme?

If you have debts and/or a mortgage, the initial focus should be on these two.

GwylimT

Our only debt is our small mortgage, I'm just interested in ISA/savings accounts, not pensions etc.

Just going to have a look at the link now, tried a while ago but it crashed, might have been works internet.

innovate

OK, fair enough, if you don't want to talk about pensions you don't have to.

I just thought you might be grateful to your younger self on of these decades if you had made provisions for your older days when you still could. In your late thirties, you still have a bit of a chance to do something meaningful for your own benefit.

On the other hand, if you have a trust fund or a forthcoming inheritance that you are certain will see you through your retirement financially, then of course you don't have to make your own provisions.

As to the mortgage - - what interest rate do you pay for it? Can you make overpayments?

GwylimT

As I said, I don't need pension advice.

Our interest rate is 1.59% none fixed, it is a three year mortgage which sounds quite silly, well I think it does anyway, we had a large deposit from our previous property but as we had to move very quickly we didn't have the opportunity to up our savings and then move making us mortgage free. But we will be mortgage free soon.

We can make over payments of 10% each year without being charged which we are currently doing as we had a substantial deposit from selling our previous property, because of this our monthly payments are quite low so we are able to over pay without struggling.

We have looked at what we can reduce, I have stopped going to the gym which is difficult to get used to, although our flats are in their final phase so the gym here will be open soon. No holidays, no TV package and we aren't the type to eat out a lot or spend a lot of money on alcohol and we aren't doing things like constantly buying clothes.

So the £900 a month is the absolute maximum we can save until we are mortgage free and at that time we will have around £500 more that we can add to our savings.

Where savings accounts are concerned I have mainly look at the Santander 123 and the HSBC regular, however the saver has a limit of £250 a month where as I could put the entire balance in the 123 and soon be in the 3% range up to £20K and then there is the cash back associated with the account and the credit card and we spend £200 a month on petrol just with my wife getting to and from work.

With bank accounts I'm not too bad, but ISA's do confuse me a bit as when I read the terms they are a bit much for this simpleton.

innovate

GwylimT wrote: »

As I said, I don't need pension advice.

OK, I won't say anything any more about pensions here - apart from one final comment: I have an inkling you are missing a huge, massive, opportunity to do something positive about your income in retirement. If you don't see it now, you will know what I mean when you are short of funds in retirement.

As an aside: my comments are not advice. Nobody on MSE is qualified to give advice.

GwylimT wrote: »

With bank accounts I'm not too bad, but ISA's do confuse me a bit as when I read the terms they are a bit much for this simpleton.

Cash ISAs are just savings account with a few deposit restrictions, and some tax advantages. In the current climate, they are a place in which to reduce the buying power of your money. There's good reading bout ISAs on the main site: http://www.moneysavingexpert.com/banking/

If you are thinking of S&S ISAs, you need to get yourself up to speed on the world of investments first. First principle of investments is that you need to be happy to have a 5-10 year horizon, and you need to assess your risks acceptance level, too. There are several good books to read - Tim Hale's "Smarter Investment" being one of the more frequently quoted ones, but if you do a bit of searching on the forum, you will find others. Also a couple of great websites, they will be mentioned in posts about the recommended reading.

bigadaj

To be fair with no employer contribution, and assuming the OP can't salary sacrifice and/ or isn't a higher rate taxpayer then I would save in isas, at least initially.

innovate

bigadaj wrote: »

To be fair with no employer contribution, and assuming the OP can't salary sacrifice and/ or isn't a higher rate taxpayer then I would save in isas, at least initially.

We know nothing about employer contribution / employer pension scheme, or possible salary sacrifices or the tax band the OP is/will be in (though assuming 'basic rate' seems a pretty safe bet). The OP has not provided information on these subjects.

Thus concluding "save in isas" is somewhat premature, sorry......

Even, and especially, if "save in isas" was indeed the best answer, putting the money straight into a cash ISA would with absolute certainty not be the most profitable approach in the present savings landscape. In this scenario, you would want to save up your cash ISA deposits elsewhere, and only make your ISA deposit just before the tax year ends.

bigadaj

innovate wrote: »

We know nothing about employer contribution / employer pension scheme, or possible salary sacrifices or the tax band the OP is/will be in (though assuming 'basic rate' seems a pretty safe bet). The OP has not provided information on these subjects.

Thus concluding "save in isas" is somewhat premature, sorry......

Even, and especially, if "save in isas" was indeed the best answer, putting the money straight into a cash ISA would with absolute certainty not be the most profitable approach in the present savings landscape. In this scenario, you would want to save up your cash ISA deposits elsewhere, and only make your ISA deposit just before the tax year ends.

OPs decision, I have suitably caveated my points and you were repeatedly recommending something that he/ she didn't want to do. They seem risk averse and wouldn't appear to be happy with any level of risk or investment, not the wisest move over the longer term but their decision to make.

Or of course they could take advice with which they are not comfortable from a random person on an internet forum, as you are the only view he/ she has had since posting - not saying you're wrong just pointing out a perspective.