new to savings

flaura

this may sound a bit silly but i'm not sure which is the best bet for me -

I have spent the last few years paying off nearly 17k of debt and now want to save my pennies towards a deposit with which to buy a house..

I am going to start saving around £500 a month starting from next month but i'm not clear on how this all works - i want to get the best rates with the money i save -

I currently have no savings but i'll need instant access i don't understand how saving £500 a month in for example ICICI at 6.3% is not better than investing £500 a month in for example Egg cash isa 6.05% will the tax i save putting my money into a cash isa monthly (can i do that?) mean i gain more froom it than putting my money into the ICICI account.

I'm not great with numbers so any 'simple' explanation will be gratefully received. !!

CLAPTON

Assuming you are a tax payer, it's best to start of with a cash ISA... then pay in 500 per month (or what you can afford) until you have used up your 3000 allowance for this year.
Decide whether you want an instant access a/c (although best not to withdraw money unless you absolutely have to) and whether fixed or variable rate interest.

As interest rates are changing at the moment I suggest you look up the best saving rate tables.

Once you have used up the 3K ISA then I would suggest you open a regular saver with a good rate.. Yorkshire BS pays 7% and you can save up to 500 a month.. this allows you to build up a healthy balance (max 20k). There are others with higher rates, but these often are linked to having the bank's current account and they usually only last a year so you need to look carefully.

And of course have standard savings a/c for money you will be withdrawing regularly.

flaura

Cheers Clapton

so maybe I should put £1000 in my normal savings then for my emergency use and then start ploughing the £500 per month into a really good cash isa that would take me up to £3000 by April 5 2008 l

eaving me a further £3000 to invest on 6th April 2008 ?

and then stash the rest in a high interest account until the following april can i then move £3000 into the isa on 5th April 2009 and a further £3000 on 6th April 2009

does that make sense ? am i getting this right ?

I am a taxpayer

Aegis

Basically, an ISA is the single best place to start saving money in cash form. And here's why...

When you get interest on your earnings, they are taxed at 20% for basic-rate tax payers. What this means is that you can immediately knock off a certain amount from your interest rates. This can be more or less modelled by multiplying the non-ISA savings rate by 0.8.

ISA savings rate = 6.05% (there might be better, check in the ISA area)

Gross ICICI rate = 6.3%
Net (after tax) rate = 6.3 * 0.8
= 5.04%

Which means that you get an extra £10 for every £1000 you invest by making the taxman keep his grubby mitts off your interest.

I hope this helps!

flaura

clear as clear as clear could be !

flaura

clear as clear as clear could be !