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How much buffer/savings to keep in a current account
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thatwilldo wrote: »What do people generally keep in their current account as a buffer/for emergencies? And
Is it worth building this account up again?
If the emergency was more expensive (or required cash) then I would pull money from my cash ISA or regular saver. I would lose interest, but I've never had an emergency that big!
So no, I would not build up a current account paying 0% interest to that kind of size again. Put money into a regular saver or ISA instead. You will earn interest, and the money is available if needed.I've got a plan so cunning you could put a tail on it and call it a weasel.0 -
Put money into a regular saver or ISA instead. You will earn interest, and the money is available if needed.
So the former could return the same as the OP was doing already...nothing! And the latter can easily be beaten by current accounts (at least until tax year end, which is when ISA decisions should be taken these days).
Have you considered 5% (or 4% or even 3% ) paying current accounts as an alternative to your own strategy?0 -
Archi_Bald wrote: »It almost pains me, some people's fixation with cash ISAs and savings accounts, when there are so many brilliant alternatives to earn more interest on instant access cash reserves.
I disagree, to me the most important thing is getting the best return even if it does give George Osborn a few quid as a result.Remember the saying: if it looks too good to be true it almost certainly is.0 -
I disagree, to me the most important thing is getting the best return even if it does give George Osborn a few quid as a result.
Some interesting ISA stats to support the above: http://www.hmrc.gov.uk/statistics/isas/statistics.pdf
Average Subscriptions (Table 9.4): below £4K in 2012-13
ISA holders by income (Tables 9.7 & 9.10): the highest average total ISA value is below £45K - around 3 years worth of the new ISA allowance. Staggeringly, it is in a rather low income range, £10,000 to £10,999 - - may be pensioners?
Definitely no case whatsoever for the average person to put any new money into cash ISA this side of March 2015. For some people, it might even be worth to pull some or all of their money out of old cash ISAs and put it into current accounts for a while. Of course there are always exceptions.0 -
Archi_Bald wrote: »Definitely no case whatsoever for the average person to put any new money into cash ISA this side of March 2015. For some people, it might even be worth to pull some or all of their money out of old cash ISAs and put it into current accounts for a while. Of course there are always exceptions.0
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The one exception is that by using your ISA allowance to the maximum now you will have a larger tax-free shelter at a time when rates might be better. That's a punt on what the savings landscape will look like in a few years. Uncertain, for sure, but it is not necessarily illogical to forego interest now for better returns in the future.0
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Crossed wires in my brain --still thinking it's 2013/14. For some reason I thought AB was suggesting not using the allowance this tax year!
Potentially there is no reason to use it this tax year at all or next tax year or until rates improve.
If you only have small amounts of cash savings then an ISA is currently pointless.The one exception is that by using your ISA allowance to the maximum now you will have a larger tax-free shelter at a time when rates might be better. That's a punt on what the savings landscape will look like in a few years. Uncertain, for sure, but it is not necessarily illogical to forego interest now for better returns in the future.
It still makes no sense to use a cash ISA until rates are better than you can get outside IF you have a small savings pot.
There is no need for the "use it or lose it" mentality if your savings are under £5k (£15k from July). If you don't use the allowance this year then you can still put it in next year or the year after. In the meantime you can get 5% on your savings (taxed) rather than 1.5% tax free. Some recent posts here about ISAs have been from people who are non-taxpayers, so they would get the full 5% in a taxable account.
Perpetuating the "ISA is always best myth" is doing this site a disservice especially when you look at the figures given in Archibald's link. The average savings balance is under £2k and 66% of people in the UK have either nothing or under £1k savings.Remember the saying: if it looks too good to be true it almost certainly is.0 -
YorkshireBoy wrote: »Many regular savers penalise you for withdrawing (and some of them in a big way!) so are not generally the best vehicle for a buffer/emergency fund, and an ISA pays less than half the interest rate that a decent current account will...even after BR tax is deducted.
So the former could return the same as the OP was doing already...nothing! And the latter can easily be beaten by current accounts (at least until tax year end, which is when ISA decisions should be taken these days).
Have you considered 5% (or 4% or even 3% ) paying current accounts as an alternative to your own strategy?
I must re-iterate - the buffer is the credit card. The regular saver would purely be for a genuine emergency, and would be used after the cash ISA to be honest. Luckily I've never had to access either it or the ISA. It would be a genuine emergency though, which (to me) means a situation where I am willing to give up some interest in order to access the cash :undecided For instance, the OP had a holiday, not an emergency, which is easily planned for and they could have waited for a regular saver to mature
As for the argument about ISAs versus current accounts - I like to use them for the cash element of my S&S ISA. Each year my regular saver matures, and gets used for a new cash ISA. The prior year's cash ISA can then be transferred into S&S ISA. Obviously I need to rethink this with the new more flexible ISA rules!I've got a plan so cunning you could put a tail on it and call it a weasel.0 -
You are correct, I must re-investigate the current batch of current accounts to see if there are any worthwhile ones around. I did have the Lloyds Vantage accounts, but found the ease of use (and interest rate!) eroded over time. I don't have many direct debits! :rotfl: Is there a handy thread with the best current account list? Shame the £5 reward at Halifax ended - infinite interest!!
Almost makes me want to cry. Getting the Direct Debits needed for those interest paying current accounts that do stipulate DDs is almost child's play, as has been discussed numerous times on this forum. Handy thread with best current accounts - how about the MSE Best Bank accounts article? The Halifax Reward £5 hasn't ended at all. They did change the T&Cs, perhaps you are no longer compliant? It's still easy enough to get the fivers.0
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