Time to get myself 'sorted'.

MoneySaving_Newbie_2

Right -- so -- this may take me a while to write and I'm expecting to miss a few things out.

For the last few years I've been saying 'this is the time to get on the property ladder', but for one reason or another, it hasn't happened yet. That's why I made the mistake of not moving my income from my current account into savings - I wanted the money available to me without incurring any costs for withdrawing it early. Therefore, I have over £17,000 in my Halifax current account, doing nothing for me. I've come to terms with the fact that I'm going to be living with my parents for the next 6-12 months, so am seeking advice on what to do with my money to 1.) get the best available mortgage product, and 2.) make some interest.

I have a sales (commission paid) job and typically take home about £1,250 net. I only have expenditure of about £350 per month (food, petrol and the council tax I pay) on my Nationwide credit card, which is paid off in full by DD from my current account. Therefore, the difference accumulates and sits in my current account.

Where should I spread this money? Is it worth paying the minimum amount into a few different bank/bs FTB saving accounts and put the rest in an ISA or premium bonds (as my father suggests now)? I feel I could comfortably afford to put away £750 p/m from my income, but would like some of my savings to be available to me at short-notice in case of any unexpected bills and car insurance in November.

FYI, I'm also planning to get a new cashback credit card and will be taking a look at MoneySavingExpert's guide. I want to be able to walk into a branch rather than pay a premium number to speak to my bank, so internet based banks are a 'no'. Any suggestions there would be nice too.

Archi_Bald

Check out the current accounts that pay interest (123, FlexDirect, Vantages). Plenty of people have several of these to get some interest on easy-access money.

MoneySaving_Newbie wrote: »

I want to be able to walk into a branch rather than pay a premium number to speak to my bank, so internet based banks are a 'no'. Any suggestions there would be nice too.

If you insist, you'll have to pay the price. Though many of the interest-paying current accounts can be opened in Branch. Just watch it that they don't sell you something you don't actually want/need whilst you are in a Branch. I think this is a high probability for you.

psychic_teabag

MoneySaving_Newbie wrote: »

That's why I made the mistake of not moving my income from my current account into savings - I wanted the money available to me without incurring any costs for withdrawing it early. Therefore, I have over £17,000 in my Halifax current account, doing nothing for me.

Why assume that savings accounts have a penalty to withdraw ? At the very least, you could have had a websaver account with Halifax and trivially moved the money back and forth between that and current account to your heart's content.

Where should I spread this money? Is it worth paying the minimum amount into a few different bank/bs FTB saving accounts

No reason to spread it around - put it in the one paying the highest rate. (Or split it between different terms if you want some in fixed rate.) Though recently some of the banks have had problems which made money inaccessible - that's a possible reason for having multiple accounts.

and put the rest in an ISA or premium bonds (as my father suggests now)? I feel I could comfortably afford to put away £750 p/m from my income, but would like some of my savings to be available to me at short-notice in case of any unexpected bills and car insurance in November.

First Direct have a nice regular-saver paying 6% on up to £300 per month. But needs a current account with them.

For ISA : tactically, the rate can be beaten by interest-paying current accounts at the moment. But strategically, there is a case for building up a pot of tax-free money for when rates get back to normal.

Most people on here would say to avoid Premium bonds. For higher-rate taxpayers, they're just about competitive with other savings accounts at the moment.

FYI, I'm also planning to get a new cashback credit card and will be taking a look at MoneySavingExpert's guide. I want to be able to walk into a branch rather than pay a premium number to speak to my bank, so internet based banks are a 'no'. Any suggestions there would be nice too.

I have accounts at various banks, inc. first direct, and don't think I've ever phoned them. All done with internet banking. (Well, I did phone Lloyds on their freefone number to open a couple of the accounts initially, I suppose.)

"Premium rate" 0845 numbers are often included in standard phone package anyway.

MoneySaving_Newbie_2

Thanks to you both for taking the time to help. I'm clearly not well educated on these matters. Since posting I've taken the time today to read up on my options.

I plan to invest all my money in property in about 12 months time; maybe as soon as January if the 'Help to Buy' scheme looks like it will help. The First Direct Savers Account would be fab, if not for the fact that if I were to touch my savings in the next 12 months I would lose that great rate. I don't believe an ISA would be of benefit either for the same reason.

What I may do is move my money and DDs from my Halifax account to a new First Direct account for the £125 gift. Shortly afterwards (if possible and without fees) move everything back to a new Halifax Rewards account IF I can still get the £100 switch bonus. Whether I do or not, I will finally settle on a Santander 123 account as my main account.
Then comes the decision of whether to buy premium bonds, or leave it and accumulate 3% AER interest. If I left it all in the Santander account, I'd probably get about £216 (plus a minute amount of cashback) over 6 months. If I bought £15,000 worth of premium bonds instead, I may get about £111 over the same time frame.

Can anyone see anything dangerous here or something I've overlooked? Will three credit-checks in the space of a month, which I presume the banks will need to do when I apply for an account, have a devastating affect on my history?
I'm leaning towards getting premium bonds because there's a small chance I can win a lot more money if I were to sacrifice about £100 of interest over 6 months, which I don't feel is a life altering amount of money.

rb10

MoneySaving_Newbie wrote: »

What I may do is move my money and DDs from my Halifax account to a new First Direct account for the £125 gift. Shortly afterwards (if possible and without fees) move everything back to a new Halifax Rewards account IF I can still get the £100 switch bonus. Whether I do or not, I will finally settle on a Santander 123 account as my main account.

I'd do it in a slightly different order:

1) Apply for the Santander 123 account, and move your money and DDs to this account.

2) Set up a couple of 'dummy' standing orders on your Halifax account (just for, say, £1, to your Santander account).

3) Apply for the First Direct account. Switch from your Halifax account. This way your direct debit details aren't being changed umpteen times (and so there's less chance of an error) but you're still eligible for the £125.

MoneySaving_Newbie wrote: »

Then comes the decision of whether to buy premium bonds, or leave it and accumulate 3% AER interest. If I left it all in the Santander account, I'd probably get about £216 (plus a minute amount of cashback) over 6 months. If I bought £15,000 worth of premium bonds instead, I may get about £111 over the same time frame.

No-brainer. Keep it all in the Santander account. 3% interest is far, far better than you're likely to get on the Premium Bonds.

3% on £15k (after 20% tax) will give you £360 from Santander.

Premium Bonds could give you c. £150.

So even if you got average luck, and got £150 from Premium Bonds, you would still be £200 down. It's not worth the gamble in my view.

MoneySaving_Newbie wrote: »

Can anyone see anything dangerous here or something I've overlooked? Will three credit-checks in the space of a month, which I presume the banks will need to do when I apply for an account, have a devastating affect on my history?

Two credit checks ... Santander and First Direct.

Will have a small, short-term negative impact. Not worth worrying about, in my opinion.

Archi_Bald

Given you have £17K, you will need a hefty mortgage to buy anything - be it for yourself or to let. You will have a great deal of difficulty to get any mortgage for a property you live in yourself, and even more problems if it is a BTL if you do not have your own property already. If you had several current account applications in the previous 6-12 months, you might find you just get turned down for all mortgage applications.

Apart from that, having all your eggs in one basket (i.e. having all your funds in BTL) is a massively risky strategy. Do you actually know what is involved in BTL? Apart from mortgages, there are insurances, agent fees, maintenance fees, occupancy voids. How are you going to fund these? What if you lose your job? What emergency funds do you have?

As to Premium Bonds - have you read these articles on the main site?
http://www.moneysavingexpert.com/news/banking/2013/07/premium-bond-chances-of-winning-cut--are-they-really-worth-it
http://www.moneysavingexpert.com/savings/premium-bonds
You might do better playing the lottery every week for a quid or two if gambling is part of your financial strategy.

I think you are wearing rose-tinted spectacles right now and should do a heck of a lot more reading before you start investing.

However, whilst you are evaluating your options in more detail, you might as well get your money to earn a bit of interest in a 123 - it's just 1 application, accommodates all your money for now, and it will pay you a relatively decent return if you set it up properly.

Archi_Bald

rb10 wrote: »

Premium Bonds could give you c. £150.

Or zero........................................

MisterMotivated

Archi_Bald wrote: »

Given you have £17K, you will need a hefty mortgage to buy anything - be it for yourself or to let. You will have a great deal of difficulty to get any mortgage for a property you live in yourself, and even more problems if it is a BTL if you do not have your own property already.

That depends on where the OP is located and what sort of properties are being considered. £17k (plus any amount saved over the next 6-12 months) could be a fairly reasonable deposit in many parts of the north east, for example.

Apart from that, having all your eggs in one basket (i.e. having all your funds in BTL) is a massively risky strategy. Do you actually know what is involved in BTL? Apart from mortgages, there are insurances, agent fees, maintenance fees, occupancy voids. How are you going to fund these? What if you lose your job? What emergency funds do you have?

"I plan to invest all my money in property" could quite simply mean buy a house to live in (certainly given the amount in question)

Archi_Bald

You are right, I seem to have jumped to the BTL conclusion for no good reason.

However, I maintain that having all your eggs in one basket is a bad idea, wherever you live in the world.

Also, even - - or particularly - - if you live in a property you own/you have mortgaged, you need an emergency cash fund of at least 3-6 or preferably more months income. You also have the cost of furniture and appliances, insurances, council tax etc.

So to "invest all my money in property" doesn't work in reality, whether the property is for your own use or for BTL.