Want to start saving. What to consider

lavenderlover

Hello,
this is my first post and I'm going to ask some really dumb questions that I should really know the answers to. I promise I will endeavour to be more intelligent after this.

I am a student in my early twenties. I've always been very good with money so I thought I could start saving next year. I have drafted a budget, so all I need is an account to put my savings in.

I am really overwhelmed. I have read all the guides on this website but I can't decide what to do.

Should I open an ISA? If so, would I open it with Santander as I already have an account with them and it would make things simpler or is that silly and I should instead go with the best interest paid (Post Office according to the guide here)?

There are so many choices and I simply don't know what I should take into consideration. The Post Office ISA can only be managed in branch, for example, so that's probably something to consider. My boyfriend thinks there's no point in thinking about interest as I won't be saving that much (although an ISA could make sense long term) and I should just open a random "other" free account with my bank (eSaver maybe?) and put money in there.

What should I think about when making this decision?

Thank you!

woody_56

Hi exactly the same question my Daughter asked me a couple of years ago.


I advised her to invest in Investment trusts.
Very low management charges-something that
you must consider.


Deal directly with the company to save further charges.
agents charges.


The ones I advised her to invest in.
Baille Gifford ---SCOTTISH MORTGAGE TRUST.
WITAN INVESTMENT TRUST.
Both have done very well and outgun the measly Building
society offers.
Both can have monthly payments paid in,which can be a good idea when markets are down.


Jim.

woody_56

Sorry both can be had as ISA's.

gadgetmind

lavenderlover wrote: »

What should I think about when making this decision?

First of all, what are you saving for and when might you need the money again?

lavenderlover

woody_56, thank you. I think I will start investing when I figure out how much I can actually save and so on, so this is definitely something I will keep in mind.

gadgetmind, good question. I'm not actually saving for anything in particular, I've just been finding that I always seem to have more money than I need (I'm quite low-maintenance so I don't even spend all of the maintenance I get for studying, plus I work whenever I can) and I could try to put some money aside for the future rather than having it in my account and ending up spending it on something random just because it's there.

I think I will just open an eSaver account for now, not much interest but easy access, until I figure out how good I actually am with savings. If I see I don't need to access the money in the near future (as gadgetmind points out) then I will consider something more profitable.

Thank you both for your replies!

Wilkins

I'd recommend opening a cash ISA to begin with. If you do not yet have any savings then you should start with cash. Wait until you have built up a good reserve of cash (6-12 months of expenditure) before contemplating investments.


The benefits of having a cash ISA is that, even if you can't get a good rate now, this money is permanently protected from tax, since you can move ISAs from one provider to another. At this stage, and in the current low interest rate regime, don't worry too much about minor differences in interest rates, just concentrate on putting the money by in a convenient way.

kidmugsy

Are you a payer of income tax? If not your best bet may be a Regular Saver account: you can get 6% p.a. at First Direct, for example. Then when the account matures you can withdraw the money and put it into a Cash ISA.
https://forums.moneysavingexpert.com/discussion/608697

But if you'd like more flexibility than you'd get with a regular saver, look for an interest-bearing current account; for example Nationwide do one that pays 5%p.a. on balances up to £2500 (or did last time I noticed).

innovate

If you can open normal current accounts, which - being a student - you might not be able to do, it would probably make more sense to start with e. g. a Nationwide FlexDirect account, simply for the higher interest rate. You may be able to qualify for gross interest - google R85.

You can still put the money into a cash ISA before the end of the financial year, to preserve your allowance for that year.

As to investments: I would recommend you don't go near investments until you understand at least some investment fundamentals. This would involve reading a book or two about investments, and knowing your way round sites like monevator and motley fool.

lavenderlover

Wilkins, thank you. Yes I will get a cash ISA. I wasn't thinking of starting from investments when I have nothing officially saved up yet! Perhaps I will just open a basic savings account now, I just need to open an ISA before the end of the tax year, correct? So I have another couple of months to decide what to do. Thank you for suggesting I just find a convenient way. I tend to think I have to do everything perfectly the first time (highest interest, best bank, etc), when I can just focus on convenience at first and then improve.

Kidmugsy, I do not pay tax at the moment as I am a full time student. I will research regular savings accounts and consider opening one after I have been saving for some months. I may find that I am not as good as I thought I was and I'm not actually able to put aside a good amount every month, in which case I would regret having opened a regular savings account, with the limited flexibility it entails. Thank you for the idea, I will consider it as soon as I figure out how much I can actually put aside every month (I have a budget but whether I can stick to it is yet to be seen)

Innovate - thank you for the information. I will have to find out if I can open a normal current account (perhaps not, I am a full time student) but regardless, I didn't know about the R85 - I work part-time but I will not make more than my allowance, so it may be useful. Also it's good to keep in mind that as long as I open a cash ISA before the end of a tax year, I can put in however much I want to preserve for the future (within the year's allowance) and I don't necessarily have to have a cash ISA as my main savings account throughout the year. Finally, yes I will educate myself thoroughly before considering investments. It is something I am interested in but I am not an impulsive person (at least when it comes to money!) so I will make sure I am as prepared as I can be before I even think about it!

Thank you everyone, I have a much clearer idea of where to go from here now: basic free savings account with the bank I have an account with already for convenience (and a decent interest rate for the first year), then depending on how that goes, consider a regular savings account. In order to keep the savings tax-free once I stop being a student, I can transfer some into a cash ISA before the end of each tax year (I won't get the full interest from the ISA but I'm not yet focusing on that). I will continue educating myself on financial topics, then, when/if I have built up a decent reserve of money, I will start considering investing.

kingrulzuk

How old are you??

lavenderlover

kingrulzuk wrote: »

How old are you??

Why? Just turned 21 (as I wrote in my original post, early twenties).