Saving over £600 per month - best options?

menyala

As many of us here I find the various savings options very confusing. Any advice from more seasoned savers would be hugely welcome!

My boyfriend and I are planning to start saving £650 per month. This might increase as and when our salaries increase as we are planning to buy a bigger flat or small house in the next few years.

I have a Cash ISA already that can still accept more money this year. But as we'll be saving monthly and not in lump sums, I wonder what the best strategy would be.

Might it be an idea to save into a regular savings account (or two if they are limited to smaller monthly savings) and keep going that way for a few years? Or is it worth to, at the end of the first savings year, deposit everything accrued in the regular saver account into the Cash ISA and start another regular saver from scratch at that point?

Keen to hear what other's might suggest. Thank you!

eskbanker

As well as regular savers, it'll also be worth checking out interest-paying current accounts, many of which outperform cash ISAs at the moment, even after allowing for tax, see http://www.moneysavingexpert.com/savings/savings-loophole for details.

bsms1147

It's probably worth doing what most do and using current accounts for savings, if you can.

One way of going about things would be to do the following;

Open a first Direct Regular Saver (6%) alongside one of their current accounts. (To avoid the fees each month also set up an online saver and put £1 in that.) The regular saver would take £300 a month.

With the remaining £350 open up two TSB Plus accounts (5%), and put the funds into one of the accounts. The next month another £300 goes to First Direct and £350 into that first TSB Plus account, which now has £700 in it.

Now transfer that £700 into the second TSB Plus account and send £500 back. This will satisfy the £500 monthly funding funding into each account.

Third month £300 again goes to First Direct, £350 remaining goes to the second TSB account which now has £550 in it. Set up a standing order for £500 from one TSB account to the other and then for the same amount on the same day in the other direction.

From then on just make sure you send £300 to First Direct and £175 to each of the TSBs which are now funding themselves automatically.

Your money is all now at an average of around 5.5% pre-tax.

It will take you 12 months to fill the TSB accounts, similarly the First Direct Regular Saver runs for 12 months. What you do at this point I guess would depend on what is available this time next year.

Whether you withdraw money into an ISA in late March is up to you, but chances are staying outside ISAs is sensible for most.

teffers

I'd recommend a few TSB Classic PLUS accounts (I have 3x).

They pay 5% Gross interest on balances up to £2000 on each account, just need to pay £500 in per month to each account (this can be internal transfers from one to the other if you have multiple accounts).

menyala

Fantastic advice! Thank you all... Will certainly look into these TSB Plus accounts.

Another question, if you open a current account in order to be able to open a savings account with the same bank, will you have to use the current account? I already have several and don't want to sit on stagnant accounts that might effect my credit rating. Would this be a problem?

cheexy

menyala wrote: »

Fantastic advice! Thank you all... Will certainly look into these TSB Plus accounts.

Another question, if you open a current account in order to be able to open a savings account with the same bank, will you have to use the current account? I already have several and don't want to sit on stagnant accounts that might effect my credit rating. Would this be a problem?

No you don't. My first direct current account is almost inactive. I only used it to pay money into the First direct regular saver. Same applies to my TSB Classic Plus account. I just have the maximum amount in it and transfer 500 pounds in and on the first of the month. For the TSB account, remember to set your statements to online only as this is one of the conditions you need to meet in order to get paid interest.

badger09

menyala wrote: »

Fantastic advice! Thank you all... Will certainly look into these TSB Plus accounts.

Another question, if you open a current account in order to be able to open a savings account with the same bank, will you have to use the current account? I already have several and don't want to sit on stagnant accounts that might effect my credit rating. Would this be a problem?

If you and your boyfriend both open a First Direct current account, you can each have a Regular Saver - £300 x 2 @ 6%

Also, if you have any 'stagnant' current accounts, why not switch them to First Direct and bag £100

bsms1147

badger09 wrote: »

If you and your boyfriend both open a First Direct current account, you can each have a Regular Saver - £300 x 2 @ 6%

^This too.

menyala

badger09 wrote: »

If you and your boyfriend both open a First Direct current account, you can each have a Regular Saver - £300 x 2 @ 6%

Also, if you have any 'stagnant' current accounts, why not switch them to First Direct and bag £100

The thing is that I don't have any stagnant accounts now, but if I opened another current account then I would as I don't need another one. I keep hearing very good things about First Direct, so will definitely look into their offerings for both current and savings accounts.

Archi_Bald

It's not in the first instance about whether you need another account. If you want to have access to the best interest paying regular savings accounts, you must technically hold the pre-req current account. You don't have to use this current account as your current account. All you need to do is hold the account, and feed the regular saver with it.

Get off the idea that a person only has one current account. Some of us have dozens.

kangoora

Do you know if you open a FD joint account are you then able to open two regular savers or do we need 2 current accounts.

6% risk free seems a bit too good to turn down