Saving big for three years - advice

bugsies

So I want to save up a small fortune now that I'm out of uni and about to start a well paid job. I'm looking to save around £40k a year for 3 years. I've been reading up on ISA's and such but I'm a little confused as to what would be best if I plan on spending that money on something after those three years.
I have set aside a good amount for myself to live off as I'll still be with parents for that time.
Should I use a Savings Account for part or all of it?
Should I do part ISA, part Savings Account?

Will not need to touch the money until the 3 years is up, so just looking at maximising interest.

Archi_Bald

Judging from one of your other threads, you still have debts. Your first priority should therefore be to pay off these debts as you are very likely to pay a lot more interest on loans than you would ever get for any savings.

S&S ISAs aren't a good choice for you as you have a mere couple of years and couldn't ride out any significant market downturns in such a short space. Cash ISAs are also not a good choice in the short term as they are paying terrible interest right now. In any case, you couldn't stick more than £45K into an ISA over the next three years.

You can deposit a total of around £50,000 into interest paying current accounts. Start with TSB, check out the threads about the interest paying current accounts. These accounts should easily see you through the next 12 months, and be your best choice even if you were a higher rate tax payer. Keep an eye on interest rates, we might see a bit of an increase in the next 6-18 months.

Putting some of your money into a cash ISA might make more sense from next March onwards. Normal savings accounts are probably not a good option as their interest rates are terrible.

jimjames

As above an ISA isn't best option and wouldn't fit your savings anyway. In addition to the suggestions a regular saver might be a good option.

But if you have debts then it is pointless having big savings until they are paid off.

bugsies

Thanks, should I split them between two interest paying current accounts then in order to stay below the £85k protection ceiling? Would the tax man not basically right off any interest I gain from using a current account over putting part of it away in an ISA? Current Account would definitely be easier as it will be around £3,333 a month for 36 months, right up until I make a certain purchase. I'm used to living off of nothing just now so that's how I intend to save so much, just continue that for 3 more years.

As for the debt we are talking less than £1,500 and it is my number 1 priority don't worry. It will be gone by February before I start saving. Knowing that I have no debt what so ever will be a great feeling for just starting out in the world. Especially when I have friends as well as a sister who see purchasing on finance and credit cards as a viable way of life. To me I only took that £1,500 as it was totally interest free and still is. I will also be putting aside £15,000 as a base savings so I hopefully never need to rely upon loans or credit incase of one off big purchases or emergencies.

What sort of interest could I expect from TSB? Would it be best to say, have my main RBS current account for all my needs then just save into two separate non-RBS interest paying current accounts?
I do hope interest rates rise, but then again people mind realise the Tories haven't actually fixed the economy and all the sensible savers keep getting swindled. To say the economy is 'growing' with a 0.5% interest rate is a joke.

Reaper

Archi_Bald wrote: »

Start with TSB

bugsies wrote: »

it will be around £3,333 a month for 36 months

Considering the rate of savings you are talking about I'm not sure I would bother with the TSB. It will pay you 5% but only on the first £2000 which you will exceed in 1 month.

For the easy life I would suggest jumping straight to the Santander 123 account instead. It pays 3% on amounts between £3,000 and £20,000, but by all means do both if you want to maximise every penny.

You will have to look again when you have it maxed out.

System

Please can I ask a nosey but curious question?
How can someone just out of university manage to save £40000 a year? Must be some salary or am I missing something?


P.

Archi_Bald

Current accounts have much lower limits than £85K on what they pay interest on - please do some research. You are of course correct, you need to not put more than £85K into any single financial institution.

You automatically pay 20% tax, and you have to declare any interest you get to HMRC if you are a higher rate tax payer, However, this does not mean that you end up with less interest than in an ISA. Please do some numbers.

bugsies wrote: »

. I'm used to living off of nothing just now so that's how I intend to save so much, just continue that for 3 more years.

nothing except your student overdraft? And the money your parents paid you (car etc)?

Archi_Bald

Reaper wrote: »

Considering the rate of savings you are talking about I'm not sure I would bother with the TSB. It will pay you 5% but only on the first £2000 which you will exceed in 1 month.

I think the OP would do well to "learn the ropes" of multi-accounting with a couple of TSB accounts to start with. Helps removing some rose-tinted spectacles that I detect.

bugsies

excelpaul wrote: »

Please can I ask a nosey but curious question?
How can someone just out of university manage to save £40000 a year? Must be some salary or am I missing something?


P.

Electrical Engineer in the Oil industry so it's not that unrealistic. I know a couple older guys who've gone down the same route and are earning well into six figures and certainly enjoy the work.
There's so many careers with that are higher salary potential straight out of uni, I have friends doing programming or chemistry and earning similar levels.

bugsies

Archi_Bald wrote: »

Current accounts have much lower limits than £85K on what they pay interest on - please do some research. You are of course correct, you need to not put more than £85K into any single financial institution.

You automatically pay 20% tax, and you have to declare any interest you get to HMRC if you are a higher rate tax payer, However, this does not mean that you end up with less interest than in an ISA. Please do some numbers.

nothing except your student overdraft? And the money your parents paid you (car etc)?

The overdraft was all blown on stupid stuff, I treated it like the free money it is. It will be paid back probably within 8 months and I'll never have paid interest on it. Looking back I should have invested in shares but I was a naive young fresher . I help my parents with a lot and intend to do a few things for them to say thanks - solar panels.

bugsies

Archi_Bald wrote: »

I think the OP would do well to "learn the ropes" of multi-accounting with a couple of TSB accounts to start with. Helps removing some rose-tinted spectacles that I detect.

I will, I'll start looking into it and crunching some numbers. Thanks for your help.