Sister doesn't understand savings 31 October 2014 at 5:47PM in Savings & investments 8 replies 1.3K views

freeman3030

Hi all, im asking in behalf of my sister (and for my own knowledge aswell).
My sister is desperate to move out and has been saving. She's managed to save around 10k.
She has a current account with natwest and a few e - savings accounts which she separates her savings into. She has one for her mortgage deposit, one for her furnishing fund, holiday fund etc. I think it's great that she's organised her money this way but she's only getting something like 0.5% interest. I said to her about putting the money in a savings account that pays better interest but she said she doesn't want the money tied up and can't access it. I don't know enough about savings to tell her what sthe best thing to do with her money. She's very low risk, but the rate she's going she's never going to save up a large enough deposit anytime soon. Any ideas I can suggest to her?

SW17

If she's prepared to do a bit of work, the received wisdom on these forums currently would be to put her money into high interest current accounts such as Santander 123, Club Lloyds etc.

You usually have to pay in a minimum amount each month (which can be transferred from other accounts and transferred out again as necessary), and some will require that a couple of direct debits are set up as well (can be transferred from other accounts or new ones if she has them). If she's a basic rate taxpayer, the rates on these accounts will beat most cash NISAs currently, even after tax.

Make sure she checks the terms of each account to ensure she maintains enough balance (but not too much, the amount of balance they pay interest on tops out at various levels), and meets the various conditions.

No doubt others will have very good suggestions, but this will give her flexibility and more interest. It is possible to have more than one of these and play with them to maximise the interest, of course it's a bit more work.

eskbanker

The above post is of course right, that there is better interest readily available, but getting, say, £300-400 annual net interest on £10K, while better than £50, is hardly going to be a game-changer when trying to assemble a deposit! It's the amount she's saving every month that will really make the difference - if she's desperate to move then she needs to be prepared to make big sacrifices and really live frugally for a while to save hard (while also saving in better interest accounts!). See other boards on here for money-saving ideas, such as http://forums.moneysavingexpert.com/forumdisplay.php?f=33

xylophone

http://forums.moneysavingexpert.com/showthread.php?t=5099524
post 8

missile

Some banks offer a savings scheme tailored for those wishing to buy property.


http://www.nationwide.co.uk/products/savings/save-to-buy/features-and-benefits


You might find this useful


http://www.which.co.uk/money/mortgages-and-property/guides/mortgage-deposit-explained/how-to-save-for-a-mortgage-deposit/

Gram_Parsons

It's Gandhi!

freeman3030

Wow thanks for the replies already, they're most helpful. She has been living really frugally. She only started saving in January. I think she had 2 or 3 to start with, I think she roughly saves about 750 a month. I want to put it forward to her that she could get her money to work harder for her (even if it is only a couple of hundred quid) but it's a couple of hundred that she hasn't had to work for. Going to talk to her today about it all. Thanks for the advice.

DominicH

eskbanker wrote: »

The above post is of course right, that there is better interest readily available, but getting, say, £300-400 annual net interest on £10K, while better than £50, is hardly going to be a game-changer when trying to assemble a deposit! It's the amount she's saving every month that will really make the difference

I think this is a really good point - the main thing is that your sister is saving at all. Yes, you can modestly increase your return with a little effort -- I do the whole cross-funding, direct debit stuff myself between various savings accounts -- but be wary of putting her off the whole idea of saving with excessively complex schemes. They do take a little bit of setting up, and I find I need to check monthly that all the direct debits and standing orders are working, and account conditions are being met. It's no big deal, but it is not a "set it and forget it" process either.

matttye

For simplicity I would just stick all of it in a Santander 123 account which will pay 3% AER on balances up to £20,000. Even if she keeps the cash all in one account, she can still keep a spreadsheet or something similar saying how much is for each thing she's saving for.

This isn't the way to maximise interest but you'll get what I would consider decent interest for little effort.