Absolute savings newbie looking for help

Diddle283

Hi guys and gals,

I'm looking for some help on what to do with my money.

For the past few years I have just been building money up my bank account. I today decided it is time to do something with it (better late than never I guess!)

My problem is, I have no idea where to start. I've never followed the financial world and couldn't tell you the difference between an isa and a current account.

I have £20k ready to save/invest. I'm in no rush to get my money back so can lock it up longer term. I am now debt free so have no credit cards or anything else to payoff.

I don't know what kind of return I'm looking for or what to expect as my money has always just sat in my bank account and what just like some opinions from people that know what they are talking about!

Appreciate any help you can provide me with!

Archi_Bald

What are your goals?

Do you have/want a house?

What is your tax rate?

How old are you?

What are your pension arrangements?

Diddle283

I don't have any goals per se. I just want to put money away for a rainy day and get the most out of what I currently have

I will be looking to buy a house in the coming years. But nothing is decided yet. I suppose what I'm saving now could be a deposit down the line.

I pay basic rate tax (20% is it?)

I'm 32

I'm paying 16% of my wage to my pension

Diddle283

I can also put aside around £500 p/m to my savings

Mistermeaner

Just my opinion but based on the info provided:

I would put 20k you have saved in high interest current accounts, info somewhere on this website but santander 123 etc are popular. This is your safe cash for rainy days and house deposit.

With your 500 spare per month I would put 200 of it into your safe cash pile.

The remaining 300 per month you could open an s+s isa with charles stanley or equivalent and start monthly investing in funds.

Perhaps start with 300 per month into vanguard life strategy 80 while researching more around the topic with a view to being more creative as you learn more.

Do some googling based on the above.

Read through several pages of threads on here as odds are most of your questions have already been asked and answered, plus you may find questions you haven't thought of yet.

Also have a Google at monevator

Good luck, come back with questions after doing more research.

masonic

Seems like saving rather than investing would be the way to go if there is a likelihood that you will want to put the money towards a house purchase within a few years. You'd probably want about 6 months of living expenses saved in a cash account anyway before going near investments. If you're not allergic to opening multiple accounts and moving money around between them to squeeze out some additional interest, it may be worth looking at current accounts like TSB Plus and Nationwide FlexDirect, but a simpler option is to open a Santander 123 account, which will accommodate the £20k you have so far. At the moment, traditional savings accounts and cash ISAs are not really fit for purpose as savings vehicles.

You could consider putting some or all of the monthly savings towards investing in a S&S ISA if it could be put away for the long term.

Diddle283

Would there be a reason for putting my money into a 123 account over an isa? I have read a little about them and realise I could put £15k in one for this years allowance and the rest next month. Would this not offer me a greater return than the 123 account option?

Mistermeaner

At the moment interest rates in cash isas are very low

To lure new business alot of banks are offering high rate accounts, which within certain limits generally give a better returned even after tax is deducted.

The main attraction of cash isas is that any interest earned is tax free, but this only matters if you have significant sums of money to put away so at the circa 20k Mark at the moment high interest current accounts will earn you more.

That said the differences are pretty marginal and I have personally stuck with a cash isa, however I only have about 3k in it, am a high rate tax payer and also lazy.

jimjames

Diddle283 wrote: »

Would there be a reason for putting my money into a 123 account over an isa? I have read a little about them and realise I could put £15k in one for this years allowance and the rest next month. Would this not offer me a greater return than the 123 account option?

Depends if you'd prefer 3% taxed (2.4%) with the 123 account or 1% or so with an ISA.

My maths would indicate that the 123 is a better option but it's up to you.

masonic

Diddle283 wrote: »

Would there be a reason for putting my money into a 123 account over an isa? I have read a little about them and realise I could put £15k in one for this years allowance and the rest next month. Would this not offer me a greater return than the 123 account option?

You can get 2.4% after tax in a 123 account, or around 2% tax fee in a cash ISA if you're prepared to fix for a couple of years. Since interest rates are set to rise, locking the money in to a low rate may not be such a good idea and given the amount you can save per month, you could consider skipping this years allowance and reviewing towards the end of the next tax year. If you did that, you could still have all of your cash sheltered in a cash ISA by 5th April 2016.

Diddle283

Appreciate your help guys, it's been really useful.

I'm particularly interested in the investing with Charles Stanley or similar idea, but after reading the website, it seems very complicated and there seems to be an awful lot of fees! If any of you have time to simplify how this works and what I need to do I would really appreciate it. If not, thank you for the time you have already given me!